Public
Bill Committee

Tuesday
17 May
2011

(Afternoon)

[Mr
James Gray in the
Chair]

4
pm

The
Chair: Order. Before we start the afternoon’s
business, it has been brought to my attention that one or more of us
are twittering from the Committee. While it is a matter of individual
taste, the general feeling of the Speaker and the Panel of Chairs is
that that is not a good practice, and that electronic devices should be
used in Committee only for receipt of a minimal number of personal
messages, and no other purpose, until such time as Standing Orders
change. It would be better if we avoided twittering from the
Committee.

The
Minister of State, Department for Work and Pensions (Chris
Grayling): I beg to
move,

That
the Order of the Committee of 22 March shall be amended as
follows—

As
members of the Committee will be aware, next Tuesday is the last day
before the Whitsun recess. We are on that day operating Wednesday hours
of the House. However, following discussion with various members of the
Committee about their commitments that day, there is a consensus that
the best hours for us to sit to maintain the length of sitting hours
would be to begin at 9.30 am and sit until 11.25 am, to reconvene at 2
pm and to close the day’s proceedings formally at 6 pm. That
clearly requires a change in the original order of the Committee of 22
March.

Question
put and agreed
to.

Clause
93

Benefit
cap

‘(5A)
Regulations under this section must provide for an exemption from the
application of the benefit cap for individuals or couples living in
social housing as defined by section 68 of the Housing and Regeneration
Act
2008.’.

The
Chair: With this it will be convenient to discuss the
following:

Amendment 234,
in
clause 93, page 62, line 25, at
end insert—

‘(5A)
Regulations under this section must provide for an exemption from the
application of the benefit cap for individuals or couples owed a duty
to be supported with interim or temporary accommodation under sections
188, 190, 193 or 200 of the Housing Act
1996.’.

Column number: 960

Amendment 242,
in
clause 93, page 62, line 27, at
end insert—

‘(6A)
Regulations under this section must provide for an exemption from the
application of the benefit cap for individuals or couples living in
supported or sheltered
accommodation.’.

Amendment
243, in
clause 93, page 62, line 27, at
end insert—

‘(6A)
Regulations under this section must provide for an exemption from the
application of the benefit cap for individuals or couples who are
offered accommodation under the prevention and relief of homelessness
powers and duties in part 7 of the Housing Act
1996.’.

Ms
Buck: The theme of housing costs inevitably dips in and
out of all the amendments and the discussion about the benefit cap.
This group concentrates on some of the housing implications and the way
in which the housing costs element of the cap will impact on
individuals, and how it interacts with statutory duties for people to
be housed by local authorities.

Before I go
into detail, I ask the Minister, when he replies, to give us more
information about how the figure of 50,000 households affected by the
cap was calculated. We know that, apart from an extremely small number
of cases, it is council tax benefit, child benefit and child tax credit
that make up the bulk of benefit entitlements for larger families that
push them over into the cap, which then affects their housing costs.
Obviously, households with higher housing costs will add to that
calculation, even when they are smaller families and therefore further
down the scale.

We understand
that 50,000 households are affected, of which 70% are in social
housing, leaving us able to estimate the number of households in the
private rented sector. The bulk of the discussion in the
media, the Committee and elsewhere, has tended to focus on individuals
who choose housing in the private rented sector. Looking at the
figures, it seems to me impossible that such a small
proportion—30% of 50,000 households—will be caught in
that
trap.

The
number of households currently accommodated on behalf of local
authorities in temporary accommodation is 48,000, of which 36,000 are
in London. Given the average cost of procuring temporary accommodation,
I cannot imagine that many of those 36,000 households in
London—and probably a high proportion of the 48,000
overall—will fall outside the cap. A substantial and growing
number of households to which local authorities would otherwise owe a
homelessness duty are now directed and assisted into housing in the
private rented sector under the prevention and relief of homelessness
duties. As recorded by the Department for Communities and Local
Government, their number is now running at some 65,000 annually. Some
of those households will be very small, and in the north of England,
for example, they will probably not be caught by the cap on the basis
of housing costs alone, but most of them will be. The larger share of
those households, more than half, are in London and the
south-east.

One
can conservatively estimate that, annually, there will be 30,000
households that would otherwise be owed a homelessness duty, and 48,000
households in temporary accommodation. whose housing costs alone will
take them over the cap. There would be some degree of interaction with
child benefit and child tax credit taking larger families close to the
cap limit, but for the most

Column number: 961

part they are free-standing. On top of that, there are all the
households in the private rented sector, who are making individual
choices and, in some cases, moving in and out of employment. Of those,
some 113,000 such households in London alone will be affected by
housing benefit caps. Now that we know what the level of the housing
cap will be, it is reasonable to assume that a significant proportion
of those families will also be caught by
it.

I
will be fascinated if the Minister can tell us his calculation. To be
frank, I do not think the Department knows the answer, and I have never
been able to work it out, but, on the face of it, between 36,000 and
48,000 households are in temporary accommodation and 60,000 or so are
in prevention and relief of homelessness accommodation annually; there
are also all the families in settled homes schemes and a proportion of
the 113,000 households in London, and perhaps even the
750,000 households in the country as a whole, in the private rented
sector and in receipt of housing benefit. How the Government reach the
figure of 50,000 is therefore a matter of some conjecture.

Will the
Minister tell us his calculations regarding the proportion of those
affected by the cap who are in the private rented sector? How will they
interact with the different categories of accommodation?
What are the modelling assumptions for housing costs overall? I believe
that the modelling is being done on the basis of a sample survey and a
computer model and that assumptions are being made about rent levels
for the purposes of the cap, but my reading is that the assumptions,
even for social housing, they are well below the level that prevails in
London and the south-east. There is a real danger that the entire basis
for the numbers affected by the cap driven by housing costs is
completely wrong. I want to probe the Minister on that and get some
assurances.

When
the cap was first proposed, the Department for Work and Pensions press
office briefed journalists that social housing would not be included in
the calculation. In their briefings, the National Housing Federation
and other housing bodies also said that they did not believe that
social housing would be caught in that calculation. We now know that
that is, not only wrong, but spectacularly wrong as an assumption.
Parliamentary questions have confirmed that 70%—nearly three
quarters—of households caught by the cap are in social housing.
The Minister may want to challenge that. My understanding is that the
DWP was not surprised, although I was surprised, because larger
families, who are overwhelmingly caught by the cap, are
disproportionately likely to be in social housing because they are poor
and are unlikely to be able to cover their housing costs in the
private-rented sector. We now have a perverse situation, which I find
extraordinary, in which families who often enter social housing, which
is available to anybody and is the cheapest form of
accommodation—average rents in social housing are significantly
below, and in some cases around half, the prevailing levels in the
private rented sector—through a route that has already taken
them through homelessness, are not only affected by the cap, to the
surprise of the housing sector, but disproportionately affected by
it.

One of the
most dramatic problems facing the Government goes back to some of my
examples and the journey that must be made by those caught by the cap:
what will happen to them? People currently living in

Column number: 962

council houses will have entered the system through different
routes—for the past two or three decades, people have often been
allocated a council house because they were defined as being in need or
homeless—and have then became the responsibility of the local
housing authority. Such people will now be caught by the cap because
the social housing rent for a large family will take them above the
threshold, and they will not be able to pay the shortfall in rent
without pushing themselves into poverty. The local authority will say
that in law, arrears have been accrued, and the family have placed
themselves at risk of losing their home. However, that will not be
through any fault of theirs: they did not take specific steps to put
themselves in that situation. The Government did—the Government
changed the terms and conditions.

The local
authority will have to find that such people are homeless. The impact
assessment notes that one cost that cannot be calculated concerns what
will happen when people now in social housing fall out of that and move
into homelessness accommodation procured by the local authority, which
is more expensive. In theory, the Government will be moving people from
a social housing property where the rent is £110 a week, which
they cannot afford, into temporary accommodation or private rented
accommodation that costs £400 a week. That will dramatically
increase the Government’s bill, and will catch that family in an
even deeper cap. I look forward to the Minister explaining the logic
behind the measure because I cannot see it.

The
Government’s top-line argument will be that such families must
cut their cloth to meet their means. They must move out of the social
housing—it could be almost anywhere in England; there are only a
few places where social housing rent is significantly lower—and
find somewhere cheaper. The problem with that argument is that no other
local authority in the country will have a duty to house that family.
Local authorities already have local connection rules which, not least
because of the Localism Bill, are becoming more entrenched. My local
authority is changing its local connection threshold to 10 years. No
other local authority will take that family, so they will not have the
choice of moving to cheaper social housing but will have to move into
private rented accommodation which, almost everywhere, is more
expensive. The legislation is almost Kafkaesque.

I cannot see
how a family will make a journey out of social housing and into
something cheaper. I am not sure that that is possible. I am sure there
will be some examples whereby a family moves from Wandsworth to
Liverpool, but I am not sure how that will be done or how that family
will deal with the costs that accrue from losing one home and finding
another. I do not know who would assist them with a deposit in the
private rented sector in such circumstances. Not for the first time, we
have ended up with a lack of coherence in the interaction between DWP
and DCLG, and in households being priced out of the cheapest available
form of accommodation and pushed somewhere more expensive. I look
forward to the Minister explaining how that will
work.

4.15
pm

Jenny
Willott (Cardiff Central) (LD): As the hon. Lady has said,
rents in the private sector are generally higher than those in the
social sector. Does she agree that it seems unfair to exclude from the
cap those in the

Column number: 963

cheaper social sector, but not those who pay higher rents in the private
sector? I do not understand the logic behind the
amendment.

Ms
Buck: The Government could argue that some in the private
rented sector will be able to make a choice about where they move. The
point about people in the social housing sector is that effectively
they do not have a choice. They are constrained by an allocation system
that is bound, for the most part, within local authority rules.
Sometimes it is bound by a housing association, which has its own
strict geographical distribution of properties.

The point
about social housing is not just that it is bizarre to move people out
of cheaper accommodation into more expensive accommodation, but that
those people cannot move anyway because of the way in which the
allocations and local authority rules operate. If a person is in the
private rented sector, they have a degree of choice over their
accommodation. Moreover, the Government have accepted, in housing
benefit rules but not for the benefit cap, that there will be local
variations. The amount of housing benefit a person can obtain in
London, capped though it is, is significantly higher than in Easington
or anywhere else, but the Government do not accept that argument in
this
instance.

Charlie
Elphicke (Dover) (Con): The hon. Lady makes a correct
point about social housing and the difficulty of moving. Is that not
why the Government’s proposals on the right to move, and their
proposals to make it easier to move within social housing and local
authority housing, are a good idea and should be
welcomed?

Ms
Buck: I am entirely in favour of more effective home
swapping and different means of encouraging greater mobility in the
sector; I have spent a great many years lobbying for those things.
However, I do not see how any of the proposals match up. If the logic
of the argument prevails, the Government will have to accept—if
they accept this, it will give us some clarity about their
position—that they are looking to move a minimum of 250,000
people. That is the minimum; I think it is a massive underestimate,
because there are at least 50,000 households, and those families are
mostly larger. The Government will have to move those households almost
exclusively from London, where housing costs are more expensive, to the
north-east, where housing costs are cheaper, although in many cases,
those costs still do not come under the cap. If that is what the
Government are saying, they should be absolutely explicit that that
movement of population from London to the north-east is happening. Then
they could explain to us the logic of moving people from London and the
south-east to an area where there are fewer jobs in order to improve
their work incentives, because that does not match up either.

I come to my
last point on housing. There is an extraordinary twist in the whole
saga. Another part of the Government is intent on raising social
housing rents to 80% of market levels for new entrants to the sector.
In some cases—possibly many—it increasingly looks as
though tenant transfers will be affected. We know from the work that
Steve Wilcox and others have done that that will increase the housing
benefit bill, and in addition, more people, through no fault of their
own, will be caught in that trap.

Column number: 964

A family who
did all the right things, but who had been in and out of work, had
faced all sorts of difficult circumstances and had been accepted as
homeless, might be on a path to accommodation where rents are lower;
that would improve their incentives to work. The Government will now
not let that happen. They will say that those people will have to pay
80% of market rents. That amount will be higher than the 30th
percentile in the private rented sector, which is the point at which
the Government are capping private housing benefit. How does that match
up? The sheer incoherence is quite extraordinary. The situation is
complicated not only by inconsistencies in DWP’s position, but
by massive inconsistencies between DWP and DCLG.

Housing
providers, the Council of Mortgage Lenders and companies lending
finance to housing developers and registered social landlords have made
it clear—we touched on this when we talked about housing costs
in universal credit—that they will not be able to provide the
much-needed new social housing that we all want, because the cap will
prevent them from being able to get in a stream of income to provide
those properties. Let me give an example. When social landlords gave
evidence to the London assembly planning committee, they spelled out
the implications of the measures. I have asked how the “80% of
market rents” measure would affect them, and how it interacts
with the cap. Ealing’s family housing association said that it
was

“a
question of affordability, but housing benefit is…the biggest
factor here. The notion of using higher rents to pay for your
development, in principle there is no problem with it so long as the
tenants can afford the rents. What is on the table at the moment is the
idea that we will charge higher rents but a significant number of the
people who we are supposed to house will not be able to afford them
because they will not be able to get sufficient benefit. That is the
fundamental challenge and obstacle”
.

The
chief executive of Places for People, which is the biggest registered
social landlord in the country, said that if housing associations
charged up to 80% of the market rent and there was a £500 cap on
benefits, its existing client group would not be able to afford the
homes that it was building. For that reason, it is doing its best to
operate within the measures, but they have a direct consequence on the
volume of new house
building.

One
way or another, the interactions are creating a pincer. Developers will
not be able to build the homes that we so desperately need, because the
people for whom they are building the homes, and who will create an
income stream to subsidise that new development, will not be able to
afford it. For those interacting reasons, I tabled an amendment that
suggests that social housing should not be included, as I think it is
completely perverse and unworkable to include it.

The other
amendments effectively relate to sub-strands of social
housing—forms of housing that people have accessed through the
local authority through homelessness duties, temporary accommodation,
prevention and relief of homelessness placements, and of course
sheltered and supported accommodation in which people are placed as a
result of disability. I would like to know how the calculations have
arisen, and how the Minister sees that all
working.

As
I understand it, because income above the cap is being recovered by
local authorities through housing benefit, presumably, where a family
exceed the cap through any other form of benefit entitlement, that

Column number: 965

cannot be recovered. How could it be recovered? Presumably, nobody who
is receiving state help because they have a mortgage will be affected.
There will not be many such households, but if a family owned their own
home, and members of the family lost their job—I am sure that
there will be such examples—and required mortgage interest
relief, presumably they would not be affected by the cap because there
is no way of recovering the money. The only way that the money can be
recovered is through local authorities. That seems to be another
strange anomaly that interacts with how housing costs are
calculated.

These are
probing amendments. I look forward to the Minister helping me to
understand how this all
works.

Sheila
Gilmore (Edinburgh East) (Lab): Although much of the
impact appears to be on families, as has been mentioned, the impact
assessment suggests that approximately 5% of the people affected will
be single people. Will the Minister explain the circumstances in which
they will be affected? A number of campaigning organisations are
concerned that the measure might affect people in temporary or
supported accommodation. A single person who claims benefit with no
child additions or other things that generally bring people up to the
cap, and who is in a standard private rented sector tenancy, will be
subject to the local housing allowance rates. As we know, they have
already been reduced to 30% of the local market rent. As has been
suggested, if the cap for a single person is to be £350 a
week—that is not in the Bill, but that is the figure under
discussion—it seems unlikely that someone in a standard tenancy
would be affected by the cap.

Are those
single people in the DWP’s impact assessment those in temporary
or supported accommodation? What is the Government’s view on
that? It is clear that significantly higher amounts are paid for such
accommodation. I do not know about the position across the country, but
I know from my experience in Edinburgh that that is true of temporary
accommodation provided directly by the local authority or by a housing
association—often on a local authority’s
behalf—and also of other forms of interim accommodation. We have
a private sector leasing scheme, which people are encouraged to enter.
As a result of the lack of temporary accommodation, it acts as a safety
valve for about 1,500 households, some of which are single-person
households.

Housing
benefit rules have treated such temporary accommodation differently. In
the past, it was not covered by the usual local housing allowance
rules, and it is not clear exactly how it will be treated under the new
system, and whether it will bring some single people in under the cap.
It would be helpful to know that. Although it is wholly undesirable for
people to be in temporary accommodation at such high rents for any
great length of time, sadly that does happen, and sometimes not just
for a few months—people can be in our private sector leasing
scheme for two, three or four years at a time. It would help the
discussion if the Minister gave us further information, specifically in
relation to amendment 234, on single people in interim or temporary
accommodation.

Jane
Ellison (Battersea) (Con): I want briefly to challenge a
couple of the assumptions made by the hon. Member for Westminster
North. London Members on both sides of the House are interested in how
some of the measures will affect them, aware, as we all are, of the

Column number: 966

unique aspects of London’s housing economy. The hon. Lady made a
lot of assumptions about how the market, particularly the private
rented market, might react to some of the changes, and I am not sure
that that was thoroughly explored. I have had detailed discussions with
housing directors in my area to try to understand what the
repercussions might be, and there are still many unknowns. Will the
Minister tell us how he feels the provision will impact on homelessness
regulations, especially in
London?

Chris
Grayling: I will happily try to answer some of the
questions that have been asked, but I have to say, as a starter for 10,
that I am puzzled. I look at the previous group of amendments, this
group and the group that lies ahead and do not know whether the
Opposition believe that anyone should be covered by the benefit cap. I
remind Opposition Members that the provision is a framework clause and
an enabling one, which does not contain specific provisions but paves
the way for the detail of the benefit cap to be implemented in
regulations. From the comments of the adviser to the shadow Secretary
of State, I had thought that the Opposition supported the principle of
a benefit cap, but I am now worried that they do not. If the Labour
party wants to vote against even the principle of a cap I will be
delighted to have that debate in
public.

My
hon. Friend the Member for Dover said earlier that the provision is
overwhelmingly popular with the public. I accept that we need to get
this right and that issues clearly need to be addressed—one or
two of which, about housing, I shall touch on in a moment—but
the policy is overwhelmingly popular, and I shall be delighted to see
the Labour party vote against it this
afternoon.

The
four amendments propose that the benefit cap should not apply to
households living in specified types of accommodation, particularly
those that might be seen as at risk and with whose housing needs local
authorities have a responsibility to assist. We have made it clear that
it is not right that some families on benefits have been able to live
in homes that most working families could not afford. Although it is
important that people continue to have access to decent housing, the
support provided needs to be founded on principles of fairness,
affordability and making work pay. The benefit cap ensures that there
is fairness in the system. Working families throughout the country make
decisions about their housing based on their incomes, and the same
should be expected of people on benefits. It is not about penalising
larger families or people living in supported or sheltered
accommodation, but about ensuring that there is a level playing field
for everyone.

4.30
pm

Households
affected by the cap will still be able to receive significant
assistance from state welfare payments, but at the end of the day
people have to take some responsibility for themselves. That includes
ensuring that they live in accommodation that they can afford. In some
circumstances, it may well require them to move to cheaper
accommodation or
locations.

I
cannot accept amendment 233. My hon. Friend the Member for Cardiff
Central is absolutely right to point out its absurdity. In most cases,
people who live in social housing pay considerably lower rents than
those in the private rented sector, so why on earth would we exempt

Column number: 967

those people from the benefit cap while applying it to those in the
private rented sector who pay higher rents? That is what is so
illogical about the Opposition’s amendments. Perhaps I should
give them credit, but unless they are entirely opposed to the principle
of a benefit cap, which is not what we have been told previously,
although, admittedly, the shadow Minister, the hon. Member for
Westminster North, did not respond to my hon. Friend the
Member for Cardiff Central, amendment 233 makes no
sense.

We
have estimated that 70% of those households affected by the cap are
likely to live in social housing. I will talk about temporary
accommodation in a moment. A non-taxed income of £26,000 is
already a lot of money to provide to any one family in social housing.
Our policy limits the potential for those on benefit to receive more
income than those in work while doing what is possible to limit
perverse
effects.

Touching
briefly on temporary accommodation, the truth is that local authorities
have a clear duty to provide accommodation that is suitable for the
applicant. Suitability includes affordability. Whatever the cost of the
accommodation, a local authority can pass on only a reasonable charge
that the applicant can afford. We are currently looking at housing
costs for those in temporary accommodation and how they might be
treated from 2013 onwards. Special arrangements already exist in
housing benefit for that position. We intend to have detailed proposals
ready this year. I say to my hon. Friend the Member for Cardiff Central
and to hon. Members on both sides of the Committee that, of course, we
have to get that right. We must address temporary accommodation
carefully and sensitively in the regulations. At the end of the day, it
is a local authority’s responsibility to secure accommodation
that is suitable for the
applicant.

Amendment
234 would exempt from the cap all households to which local authorities
owe a duty because they are homeless or threatened with homelessness.
Duties range from providing advice and assistance to the main
homelessness duty, whereby a local housing authority must ensure that
accommodation is available for the applicant. We are looking at future
arrangements for that. We will provide details later this year, but it
is much too early to consider a blanket exemption for this group,
because it is not yet clear to what extent they would be affected by
the overall benefit cap when it comes in. The amendment would create a
degree of inflexibility that makes it more difficult for us to provide
a sensible system that reflects some of the differing needs with which
we have to
deal.

I
remind hon. Members that this is a framework clause. I have no doubt
that it will be followed by a lot of detailed measures and a lot of
detailed debate. It simply puts in place the mechanics to introduce the
benefit cap, and I will not accept amendments that remove the
flexibility to get that right by writing into the Bill, as opposed to
regulations, things that we may need to consider carefully
later.

Amendment
242 would require us to
introduce

“an
exemption from the application of the benefit cap for individuals or
couples living in supported or sheltered
accommodation”,

and
amendment 243 would exempt from the cap anyone who has avoided
homelessness because their local authority has helped them find
alternative accommodation. The

Column number: 968

amendments undermine the simplicity of the current proposal. There is no
formal definition of supported or sheltered housing. It would be very
difficult to come up with a classification that captures the sheer
variety of types of supported or sheltered
housing.

We
have always said that we will look at ways of providing transitional
assistance in hard cases. There may be an argument for providing such
help in some of the circumstances raised in this debate. We have not
yet taken any decisions on who should get this support. That is where
hon. Members’ contributions are valuable. We listen carefully to
the issues raised in a debate like this. We will look carefully at the
points made as we shape the final arrangements. The Bill gives us the
flexibility we need to listen, respond and deliver something that is
right. That is what we will seek to do.

A couple of
specific questions were asked. How did the Government estimate the
50,000 households who will be affected by the cap? The impacts on
households are estimated using the DWP’s policy simulation
model. It is a micro-simulation model based on data from the 2008-09
family resources survey, uprated to the relevant year’s prices,
benefit rates and earnings levels. The modelling was carried out under
the current benefits system rules and the impact assessment makes it
clear that there is some uncertainty over small groups, which may not
be fully captured by the
survey.

The
hon. Member for Edinburgh East asked about single people affected by
the cap. The impact assessment showed that we expect relatively few
single people without children to be affected by the cap. Our modelling
suggested that only around 5% of the cases would be single person
households. It is difficult to generalise about the characteristics of
such a small group of cases, except to say that we believe that the cap
would rarely apply. Let us put the concerns about housing benefit in
context. The majority of people on housing benefit do not get amounts
that come anywhere near the scope of the cap. In November 2010, 96% of
the housing benefit case load got £10,000 a year or less in
housing benefit; 75% got £5,000 per year or less.
However, it is important to have a system in which people have
confidence. That is the purpose of the policy as a
whole.

There
are clearly issues that need to be addressed as part of our detailed
work on the regulations. We have said that we need to look carefully at
how we move from the current system of supporting people in temporary
accommodation to a new system in the context of the benefit cap. That
work will be done. What I cannot accept this afternoon is a set of
amendments that tie our hands in doing that work and that write into
the Bill things that have no place in an enabling clause.

The clause is
designed to create the flexibility for us to listen to the issues that
have been raised in a debate like this and to shape something that is
consistent with the views of hon. Members, the reality on the ground
and the need to deliver proper support to those who need it. I hope
that that goes a little way towards answering the questions. There is
much more work to do in this area. I have listened to and heard what
hon. Members have said but I am afraid that I cannot possibly accept
the hon. Lady’s
amendments.

Ms
Buck: I am grateful to the Minister. He gave us a little
extra information about housing costs. What he told me confirmed my
fears that the model for estimating

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who will be affected is probably not robust because we start by talking
about quite a small number of people—50,000
households—who are affected, which is already in statistical
terms almost insignificant. It is about 1% of households on
working-age benefits. Because we are using a micro-simulation model and
because it makes assumptions about rent levels that the Minister did
not share with us but which I believe are significantly below actual
rent levels across the piece, the chances of getting it wrong by a
factor of one, two, three or four, with not 50,000 households but
potentially 100,000, 150,000, or 200,000 households being affected,
including all the children in them, is huge. It is just a simple
calculation looking at what we know about households, even in the
priority categories of the private sector. That is
worrying.

Although
we will return to the matter in regulations, the Government have
introduced the Bill. They have asked us to scrutinise it in Committee
line by line and we are trying to do so, but with little information
and, to be honest, in many cases, information that we simply cannot
trust. Again and again, the assumptions that are being made repeat the
implication that the overwhelming majority of households affected by
the provision are the same households that we have discussed in the
context of the housing benefit caps: individuals making expensive
housing choices, and there are some. We agree that there are certain
behavioural draws, in some cases, that need to be tackled, but that is
not what we are talking about. I do not think that the Minister has
reflected on the sheer craziness of having a system that means that
70% of those affected are in social housing. They are
affected not because their housing costs are dragging them into the
cap, but because they are larger families and their child tax credit
and child benefit payments, in particular, are taking them above the
cap for the cheapest housing in the country. That does not make any
sense.

We
already have a method; we can argue about the exact level at which it
is set, but we have a method for capping housing benefit. The local
housing allowance is a de facto cap and an additional cap is being
introduced on top of that. That additional cap was introduced just
weeks before the Conservative party conference that introduced this new
cap, as if none of those things existed. So I am afraid that I am not
confident about the numbers. These were probing amendments that were
trying to find out—and I do not think we have—whether we
can trust the figures that we are being given for how many people are
affected, whether we really get a sense that the Government understand
the cap’s interaction with people to whom legal duties have been
owed in terms of homelessness, and whether they understand how the cap
will interact with people who are in social housing.

The Minister
tells us that we are ruining his proposal by introducing complications
into a system that values simplicity. When the drive for simplicity
conflicts with other legal obligations and overrides the needs of
people, in many cases exceptionally vulnerable people who are, by
definition, at or even below the minimum level that the Government have
decided they should live on, that is the wrong approach. I do not
intend to press these amendments. I am looking for more information. I
do not think that we have had it today and I certainly think that we
will have to go away and press the Government by other means to give us
some of the information that

Column number: 970

allows us to make a proper assessment of what the cap will mean. At the
moment, I do not think that the Department really knows the answer to
that question.

‘plus in work
benefits which the average earner might expect to
receive’.

The
Chair: With this it will be convenient to discuss the
following: amendment 182, in clause 93, page 62, line 27, at end
insert

‘equivalised as
to household
size’.

Amendment
240, in
clause 93, page 62, line 27, at
end insert—

‘(6A)
Regulations under this section must exclude housing benefit and any
components of universal credit that relate to housing costs from the
amount specified under subsection
(5).’.

Amendment
241, in
clause 93, page 62, line 27, at
end insert—

‘(6A)
Regulations under this section must exclude child benefit, child tax
credit, and any elements or sub-elements of universal credit that are
paid in respect of children, from the amount specified under subsection
(5).’.

Amendment
245, in
clause 93, page 62, line 27, at
end insert—

‘(6A)
Regulations under this section must exclude any element or sub-element
of universal credit paid in respect of a disability from the amount
specified under subsection
(5).’.

Ms
Buck: The amendment seeks to explore the
Government’s thinking and calculations a bit further. In fact,
they all do, but one deals with comparability and the others cover the
interaction of the cap with housing benefit. We talked about the
interaction with rent obligations and housing duties, housing benefit
and the payments made to children and
families.

I
will try extremely hard not to duplicate what we have been talking
about in terms of the cap, but, obviously, the Government’s
central premise is that people who are out of work should not receive a
benefit entitlement which is above that of the average working
household. As we have previously said—I am seek further
clarification—one problem is that we do not think that we are
comparing like with like. For the cap to have any credibility,
households that fall foul of the cap should be compared with the
income, not the earnings, of comparable households. It is a fundamental
flaw in the benefit cap if we are talking about comparing a single
earner household with one, two or possibly no children with a couple
with possibly five children. The lack of comparability in such
circumstances is
worrying.

4.45
pm

We
would like greater clarity, if not in Committee then afterwards, about
average income including in-work credits and benefits—council
tax benefit, housing benefit, working tax credit and, potentially,
universal credit. What would the entitlement be for each size of
household and for households in different regions? We would have more
confidence in a set of comparables if we could say that some families,
such as out-of-work lone parents with four or five children in London,
receive more

Column number: 971

benefit, as the Government imply, than same family would in work.
Similarly, the total out-of-work entitlements of a couple with two
children in the midlands or the north of England could be compared with
those of a family of the same size who are in work. We would then have
a clearer idea of exactly how big the problem is and what the sources
are of the different cost components of the problem.

Looking at the
Office for National Statistics data, I understand that we have a
national figure for the difference between the earnings and the income
of working households. That gives us an average of £3,319 a
year. If there were two households, one of which was out of work and
subject to the cap and the other was in work, the working family would
receive in-work benefits of £3,319. In one case, we add state
assistance in the form of council tax benefit, housing benefit and so
forth, and in the other case, we do not. Before making a final
decision, we should at least have that information in front of us to
see whether we are comparing total state support with total state
support in its different guises for families of different
kinds.

I
suspect—perhaps the Minister will clarify this—that if we
drill down into more comparability at regional and household levels, we
will find that it is very rare indeed for families of the same size to
be better off out of work than they are in work. Where that is the
case, the overwhelming number would be at the very extreme and involve
housing costs, which will almost invariably be of the kind that we
discussed on the previous amendment—households placed in
temporary accommodation for the prevention and relief of homelessness.
We must look at the special provisions, and the Minister has implied
that there could be special provisions for those
categories.

We
have to look at the extreme cases; but for the overwhelming number, we
need to know whether we are comparing like with like and know exactly
how big the problem is when we take the regions of London and the
north-east. Do the Government have that information? Can the Minister
tell us what the average income, including in and out-of-work benefits,
would be for every household size in every region, so that we can have
an informed opinion on the right way to proceed? So much of what we
have talked about on the benefit cap is based on assumptions and
micro-simulations, and, frankly, we are flying blind. It would be
helpful to have a more informed
conversation.

The
other amendments in my name probe a little deeper into the composition
of the different elements of the benefits that make up a household
income that leads to the cap. I will not repeat all the arguments, but
Shelter and the housing organisations are particularly concerned that
housing costs will bear the brunt of the cut-off that having a cap
implies and that that will push substantially below the poverty line
households in ordinary circumstances in social housing and, in some
cases, in ordinary private rented accommodation in the cheaper parts of
the country. Their major piece of research, which I believe was done by
Cambridge university, looked at the number of areas where families
would face a shortfall of at least £20 a week or £86 a
month, because their tax credits, child benefit and so forth pushed
them over into the cap, which then affected their housing costs. It was
found that, in 91 local authority areas in England, families with a
three-bedroom house—I

Column number: 972

am not talking about the seven bedrooms in Knightsbridge about which we
hear so much—would have to find at least £86 a
week.

We should
remind ourselves, because we forget time after time, that the income of
the households that we are talking about is already set at the lowest
level that the Government have decided is reasonable for households to
live on and that, if there are reductions in household income below
that, the implication is inevitably poverty. The housing
sector’s main concern is to take housing costs out of the
calculations so as not to increase homelessness.

We can be
confident that, for a host of reasons, a substantial number of
households will simply not be able to uproot themselves from London and
the south-east and other areas with higher costs that are now deemed no
longer to be affordable. We can all think of examples: some families
will be looking after an aged relative, some will have children who are
about to take public examinations and some may have been in work a few
weeks ago and have a realistic prospect of getting back into work soon.
Those households will choose to take a hit on their income, which may
be temporary but could last months and in some cases even years. That
fall in post-housing cost income and the struggle to pay the rent and
avoid homelessness will drive a significant number of households into
poverty.

What are the
implications? I would like the Committee to know—I would have
liked to know before we started this debate—the knock-on
implications for a benefit cap in each case for taking the various
benefits out of the calculation. The Minister accuses us of tabling
wrecking amendments and says that no one will be affected. So he says,
but who will be affected? How many will be affected in each of those
cases—if child benefit was not included, if child tax credit was
not included or the child element of the universal credit was not
included? Given a robust set of calculations, which we do not have, how
many people would be
affected?

Finally,
has the Minister calculated the implications for poverty? We have heard
a great deal about the Government’s high hopes for universal
credit in reducing child poverty. The Opposition hope for the same; we
hope that the simplification agenda will indeed have a beneficial
effect on child poverty. I believe that 300,000 children are to be
lifted out of poverty by universal credit, but the benefit cap, which
will invariably hit larger families with three, four or five children,
will probably push a 50,000 minimum of households and probably more
into poverty because of the benefit cap. My maths says that it will be
easy to cancel out the 300,000 children who will be lifted out of
poverty by universal credit by another 300,000 or more being pushed
into poverty by the imposition of the overall benefit cap. It is yet
another element of the benefit that makes no sense.

I hope that
the Minister will respond to some of those questions and assure the
Committee before we go any further that we will have better information
on which to judge the impact of the cap.

I reinforce
what my hon. Friend the Member for Westminster North says, and I shall
speak first about comparing like with like. She alluded to the
importance

Column number: 973

of not mixing earnings and income. Earnings are merely a component of
income for most families, and those earnings will be supplemented by a
range of in-work benefits and benefits for children. She has also
rightly drawn attention to the importance of looking at the comparison
regarding family structure.

I am
particularly concerned because the driver, as far as we can see, of
families who will be hit by the benefit cap is predominantly family
size. More than anything else, it is the number of people in the
household. We should understand the impact on those families with a
larger number of children. We know that larger families are
particularly vulnerable to poverty and that the children in those
households are particularly at risk of poverty. Imposing a benefit cap
on them will put those families at risk of greater
poverty.

I
would be grateful to the Minister if he told us what assessment has
been made of the likely impact on financial losses for families with
different numbers of children—three, four, five, six, seven and
so on. Has any assessment been made of those losses, and therefore of
the potential impact on child poverty? I am not aware that any
assessment has been made of the likely period of time for which such
families might find themselves affected by the benefit cap. The impact
assessment is quite thin on the details of how families with three or
more children are affected.

The amendment
goes to a point about fairness and being rational about the way a
benefit cap is calculated and imposed. It cannot be rational to compare
a single figure plucked out of the air to represent average earnings
and to apply that figure to all kinds of family structure and type if
we are interested in having a benefit system that in every other way is
designed to be flexible enough to reflect different degrees and aspects
of need. There is an intellectual inconsistency in putting in place a
single figure benefit cap to apply across the board, when in every
other way the benefit system does not operate like
that.

The
amendment proposes that the benefit cap should be adjusted to take
account of family size and, therefore, to provide a fairer comparison
between families in work and out, which we understand to be the thrust
of the Government’s intentions. I support all my hon.
Friend’s comments about other aspects of the inconsistencies and
lack of rational approach to the imposition of the benefit cap. I look
forward to the Minister’s
comments.

Chris
Grayling: It is increasingly clear that there is a divide
in philosophical view on these issues. The amendments seek to provide
that the cap should depend on household size and expected amounts of
in-work benefits. They seek to carve out various benefits and elements
of universal credit from the cap. The key point is that there needs to
be some limit on the overall benefits that it is reasonable for the
state to provide. It is not reasonable or fair that households on
out-of-work benefits should receive an income that could far exceed the
net earnings of working households. That is the issue.

The hon.
Member for Westminster North talks about the different circumstances of
different families. People in work have to take decisions about what
they can afford to do. Why is it not reasonable to set a limit on the
amount of support that we provide to people who are not
working?

Column number: 974

Kate
Green: Does the Minister not accept that people in work
are still eligible both for in-work financial support if they are on
low earnings and, in almost all cases, for support with the costs of
raising their
children?

Chris
Grayling: Our intention is to set the cap so that it
represents the average net weekly wage for working households:
£500 a week for couples and lone parents, and £350 a week
for single people without children. That is the equivalent to a
household with a salary coming in of well in excess of £30,000 a
year, taking into account tax and national insurance payments. We are
talking about the net figure for the benefit cap. Do we honestly
believe that it is unreasonable to tell people who are in receipt of
state support that there is a limit to how much support we will provide
to them that is set at a net earnings figure for a working household? I
am disappointed that the Opposition do not seem to feel that that
divide is reasonable. We have to be thoughtful about some aspects of
the changes in relation to things such as temporary accommodation in
London. We have to think through the implications in individual
circumstances; but surely, for the vast majority of claimants, this is
not an unreasonable
proposition.

5
pm

Sheila
Gilmore: Is the Minister not creating an artificial
distinction between one group of people who are out of work and
claiming benefits, and another group who are taxpayers and are
supporting themselves? In fact, there is a great deal of crossover.
People go in and out of work, and people who are in work who have, say,
a large family—the group of people that we are really talking
about—will be receiving additional assistance through child
benefit, tax credits and universal credit successors to those, because
of the size of their families. There is not, therefore, the clear-cut
distinction that the Minister is trying to
draw.

Chris
Grayling: The average value of in-work benefits across the
population as whole is £20 a week. The amounts that we are
typically providing to families with parents in work are much lower
than the benefit cap. We do not think that it is right to structure a
benefit cap based on the size or composition of a household or the
specific benefits that they receive.

Kate
Green: Can the Minister clarify whether that average
payment of £20 a week of in-work benefits is only the adult
payments, or whether it includes benefits for
children?

Chris
Grayling: That is the figure for adults, but I will give
the hon. Lady a figure for children in a moment. The question is
whether we believe that it is right to have a crossover line and say
that we will provide people with support up to a point, or whether we
simply uncap benefits and say that we can provide an indefinite amount
of support. The approach that the hon. Member for Westminster North
proposes would result in an individually calculated cap for virtually
every household. She is talking about a benefit level that is
determined by the current level of housing benefit and the number of
children, which is basically the current situation; effectively, there
is no cap at all. Attempting to do that would compromise the clear
message that our reform is intended to provide. It would lead to a lack
of clarity for claimants and increase administrative
complexity.

Column number: 975

I now turn to
the amendments. Amendment 182 would set the cap with direct reference
to the size and composition of a household. We are introducing the cap
to ensure that the benefit system is fair, and is seen to be fair, to
the taxpayers who pay for it. The salaries of those in work are not
determined by family size, and we believe that it is right to apply
that principle to the level of the cap.

Amendment 239
would require us to take into account the level of in-work benefits
that someone earning the average wage might receive when setting the
level of the cap. That would still result in a level for the cap that
was based on averages, so it would be no better a mechanism for
accommodating household size or characteristics than our intended
method. I acknowledge that our proposed level for the cap is lower than
the total income of someone who is receiving in-work benefits while
earning the average wage, but surely we should be ensuring that people
are better off in work. Returning to the point about state support, if
we look at grossing up the level to the mid-£30,000s a year, at
that level very few people are getting benefits of any sort, whether
working tax credits or housing benefit. In proportion to the working
population—we are talking about the equivalent of a salary in
the mid-£30,000s a year—we are not setting the cap at an
absurdly low level. There has to be a dividing
line.

Kate
Green: The Minister has said that households with incomes
in the mid-£30,000s would be unlikely to be receiving any
financial support, but they would be receiving child benefit, and I
think I am right in saying that they would continue to receive an
element of child tax credit and potentially the tax breaks for child
care as well.

Chris
Grayling: As the hon. Lady knows, child benefit
is paid at a flat rate until an individual becomes a higher
rate tax payer. The other benefits referred to by the hon. Lady would
become a component part of the universal credit and would taper away.
By the time someone starts to earn £35,000 or £37,000 a
year, one would expect virtually all the support they receive to have
tailed away.

Amendments
240, 241 and 245 all attempt to allow households to receive total
benefit above the level of the proposed cap, by requiring the
Government to disregard certain benefits for housing, children and
disability when calculating how much total benefit a household
receives. Each amendment undermines the fundamental principles that
underpin the cap, namely that there must be a limit to the amount of
benefit a household can receive, and that work should pay. As we have
made clear, there will be some exemptions. Disability is an important
area, where we recognise that there are extra costs, issues and
challenges. That is why we will not apply the cap to households where
someone is entitled to disability living allowance or an equivalent
benefit, or to households where someone is receiving war widow’s
or widower’s benefits. The cap is intended to increase
incentives to work, so we will exempt households with a member who is
entitled to the working tax credit, and there will be an exemption for
working households on universal credit.

Column number: 976

We have now
considered three sets of amendments that would effectively destroy the
core principle of the benefit cap. We are talking about a total income
per household that is equivalent to the annual income in a working
household—the mid £30,000s. The net figure of £500
a week at which we intend to set the cap is the net equivalent of a
household with an income midway through the £30,000s per year. I
think that is an entirely reasonable level. It is not appropriate to
have a cap that is varied because trying to link the cap to household
size or region would create a system as complex as the one that we are
currently trying to simplify. To clarify that last point, the total
income of those earning the average wage including in-work benefits, is
approximately £20 a week more than the average
wage.

I think the
Government’s approach is right and I do not accept the
amendments tabled by the Opposition.

Kate
Green: I apologise for interrupting the Minister again,
but did he not say a few moments ago that the £20 average was
for adult benefits only?

Chris
Grayling: Yes. It does not include child benefit; I said
that. It includes the payments made to adults. It is the in-work
benefits received at that level.

Kate
Green: Does the Minister accept that that is
not a representation of the income of a working
household?

Chris
Grayling: As I have said, the in-work benefits that would
be received by someone at that level—those in receipt of housing
benefit or tax credits, for example—the average amount across
the whole population, is £20 a week. But that is a side issue. I
do not accept the principle that we should apply to the benefit cap all
the various caveats that Opposition Members wish to apply. This is a
simple, straightforward framework clause and I cannot accept the
amendment.

Ms
Buck: Simple indeed it is, and the likely consequence of
that simplicity will be quite appalling rough justice. That has been
drawn out from the Minister’s comments and our discussions this
afternoon. Some people will fall foul of the cap simply because, even
if they wanted to go to work, their child care costs would be such that
work would not pay and would leave them £100 or more worse off.
That is extraordinary. Some people will fall foul of the cap because
they happen to live in London, go to work on Friday but lose their job
on Monday. Other households may have been on benefits for a great many
years, but because they live in a different part of the country they
will not be affected.

Take two
households of exactly the same composition. One may not be subject to
work-search requirements because they have three children under the age
of five, for example, and live in social housing and are not affected
by the cap; but the family next door with five children may be subject
to work-search requirements, even though their children are the same
age. There are so many inconsistencies and anomalies, and I have not
the slightest doubt that there will have to be massive concessions,
because the more we dig, the more it will become obvious that the costs
will not add up. The anomalies will be too numerous, and the hardship
will be too great for Ministers to stomach.

Column number: 977

The Minister
did not give us any assessment of what the implications would be for
child poverty, which the Government have said that they are as
committed and signed up to tackling as we were. They have pinned so
much on universal credit, but I do not see how it is possible for the
overall benefit cap to do anything other than—at least—
eradicate any of the child poverty gains that are made as a consequence
of universal credit.

All I sought
to do with this group of amendments—and I have been disappointed
with the response—was ask the Minister whether we have the kind
of information that would allow us to really understand to what extent
the central premise of the Government’s case holds
true. The Minister is pointing to a national figure, which, as we have
argued, is an unreliable guide to income because of the enormous
variations in incomes and housing costs in different parts of the
country, and because it fails to take into account different household
sizes.

Before any
final decisions are made on whatever the final framework is for the
benefit cap, we would simply like to see what the projected losses are
for households of different family sizes in different parts of the
country, as my hon. Friend the Member for Stretford and Urmston has
asked. We would also like to see the comparable levels of in-work
credits for each different household size in different parts of the
country, as well as what the implications would be of taking out all
the different benefits, so that we can at least properly understand
those issues.

Guto
Bebb (Aberconwy) (Con): I have listened carefully to the
arguments about regional variations, and I represent part of the world
in which the average wage is comparatively low, but in view of the
comments about the need to recognise regional variations, would the
hon. Lady be in favour of getting rid of national pay
bargaining?

Ms
Buck: Mr Gray, that is so far outwith the scope of the
Committee that you would rightly strike me down if I attempted to
answer. It is a completely different argument. We know that there are
different incomes in different parts of the country, that different
levels of in-work benefits are paid to families and that there are very
different housing costs. That is what lies at the heart of the debate
about the benefit cap.

I sought
clarification from the Minister on a number of those points, but I fear
that I did not get it. These were probing amendments, tabled to elicit
that information, and my hon. Friends and I will seek to find out from
the DWP what information it holds as we go forward, to allow us to make
these decisions. I regret—and my regrets are shared by the
Deputy Prime Minister, and by the Minister’s boss, the Secretary
of State for Work and Pensions—that we are having to conduct
these supposedly in principle discussions in the absence of so much
important information, which would allow us to analyse what the impact
of the benefit cap would be, and what meaningful and workable
variations there might be that we could all agree on. That is a point
that we will want to return to, but I beg to ask leave to withdraw the
amendment.

Amendment,
by leave, withdrawn.

The
Chair: As the Committee will recall, I took the view that
we have had a fairly substantial discussion on the clause in principle
during discussion of the various

Column number: 978

groups of amendments, and that therefore we did not need to have a stand
part debate. However, representations have been made that we should
have a brief debate, so perhaps it is sensible to do that, but in a
reasonably light way.

Question
proposed, That the clause stand part of the
Bill.

Jenny
Willott: I will be brief, as a lot of my concerns about
the clause have been mentioned earlier in today’s
debate.

First, I want
to make it clear that, unlike the shadow Minister, I do not have a
problem with the principle of a cap, and I am happy to put it on record
that a cap is the way forward. It is not good for taxpayers to fund
benefit claims, and it is not good for families if it is impossible for
them ever to afford to get into work. In my view, however, the cap as
proposed will not work, and I am concerned that the interests of
children in particular have not been taken properly into account. The
Government’s proposals would effectively punish children for the
decisions of their parents, particularly in families with a large
number of children. In addition, hard-working families would be hit,
because there is no cushion for those who suddenly lose their job and
find themselves unable to pay their rent. I also find it worrying that
even quite small families will be affected. Many two-child families in
London will lose about a third of their housing benefit, and
three-child families in a third of local authorities will have a
shortfall in their local housing allowance. Those are not sizeable
families, so the effects can be quite
broad.

5.15
pm

Some
of the implications are worrying. The average loss is £93 a
week, but 15% will lose more than £150 a week, which is a
significant amount of money. Some smaller families with three or four
children could lose enough to force them to move house, as we have
heard earlier today, which will move them inevitably further and
further away from their support networks and their families. I should
be grateful to the Minister if he confirmed what is implied in the
equality impact assessment, which is that for some larger families
there will be literally nowhere in the country where they could find
affordable housing. What would happen to those
families?

The
Minister has said that the cap is intended to incentivise work, but not
everyone can work. The cap does not differentiate between those who are
currently receiving jobseeker’s allowance and those who are on
employment and support allowance. The cap will affect people whom the
state does not expect to work and who are considered too sick to work.
I also understand from the paperwork that half of the affected families
will contain somebody who is disabled but not in receipt of disability
living allowance, so the family will not be exempt from the cap. In
addition, two thirds of those who are affected will be lone-parent
families, and some of those will have children aged under five. Those
parents are not expected to work, but they will nevertheless be caught
by the
cap.

People
whom we do not expect to work will, therefore, be caught by the cap.
They could only escape that if they become eligible for DLA, so a
couple of perverse incentives are created by the measure. One is that
it could encourage people to try to claim DLA for a child

Column number: 979

in their household, as that would exempt them from the cap. DLA for
children has no objective test, so that may be a way for people to go
forward. As has been mentioned, the cap could also encourage family
breakdown, because a family that splits up would effectively be
entitled to double the amount of benefit, which would be
worrying.

The
savings that are due to be made are illusory. The proposals are
intended to save £225 million in 2013-14 and £270 million
in 2014-15, but that relies on the assumption that no one will change
their behaviour to avoid the cap. Some families will find work in order
to escape the cap, which is clearly a good thing, but they will
potentially be able to claim a larger amount of money via in-work
benefits. Others will be made homeless, which, as we have discussed,
will be more expensive for local authorities, and others will try to
get on to
DLA.

Is
the Minister able to confirm what I have heard, which is that the DCLG
estimates that the cap will lead to an increase in homelessness of
around 20,000 people? That would cost local authorities some
£300 million in emergency housing for those families, which
would totally cancel out the £270 million estimated savings. The
impact assessment acknowledges that, for some families, housing benefit
may not cover their rent and that some will go into rent arrears. It
also accepts that that will lead to extra costs for landlords and for
the courts as a result of eviction proceedings and the recouping of
those arrears. The impact assessment also accepts that local
authorities will incur extra costs, because of the homelessness, and
the estimate for that together is some £400 million. I shall be
grateful if the Minister will elaborate on that figure. It seems a
little crazy to introduce a policy that costs more to implement than it
could save, particularly given the implications of that
policy.

We
have already had much discussion about the impact of potentially
forcing families to move as a result of the changes. I do not believe a
lot of the scaremongering about some of the former changes to housing
benefit, which the Opposition suggested would force all poor people to
move out of London and the south-east. I do not believe that that was
true. However, I am concerned that this policy could mean that families
receive housing benefit way below the level for which they are eligible
and way below the housing benefit cap. That would leave them with the
choice of either paying the difference themselves, which in almost
every case would probably be impossible, or moving. That will uproot
children from schools, will mean people moving away from their support
networks and will put pressure on cheaper areas, as we have already
heard. Those areas often have fewer job opportunities, which also has
implications for worklessness. In addition, if people move away from
family and friends, there is less chance for those families to rely on
informal support networks for child care when parents go back to work.
That has implications for the affordability of people being able to get
back into
work.

The
final issue that I want to raise is the impact on social housing. The
impact of the 80% rent rate on social housing across the country has
already been discussed, and I share some of those concerns. However,
the cap could have a further impact on social landlords because those
affected by the cap will no longer receive the full amount of housing
benefit, so they will have to top up the rent themselves from their
other income. As identified by the impact assessment, that will lead to
an

Column number: 980

increase in rent arrears, and in many cases it will no longer be
possible for the full rent to be paid direct to the landlord. Families
will therefore become less attractive to landlords in the private
rented sector because they will have to ensure that the rent is topped
up from their own income. The policy also makes things more expensive
for social landlords because they will receive housing benefit directly
and will have to pay for the additional administrative costs of getting
the top-ups in to ensure that they receive the full level of the
rent.

Stephen
Timms (East Ham) (Lab): The hon. Lady is making some
telling points. She has given us some estimates of the cost of the
policy, which we can offset against the savings that the Government
have told us will be accrued. Does she believe that her estimates of
the cost will be endorsed by the
DCLG?

Jenny
Willott: That is what I am asking the Minister today. I
have heard various figures being bandied around, but I should be
grateful if the Minister would clarify what those figures are because I
am not sure what the estimates are likely to be. As I said, I agree
with the principle behind the policy but, for the reasons I have set
out, we are a long way from finding the right way of putting that
principle into practice.

There are a
number of different ways to mitigate some aspects of the policy, many
of which have already been debated today. We could exclude child
benefit from the cap, which would take account of family size; we could
exclude housing benefit, which would take account of regional
differences in housing costs; or we could set the cap at the level of
the average income of family households, rather than including
single-person households in that calculation. That would mean the
figure is set at around £672, which is significantly higher than
the £500 cap that has been put
forward.

I
am glad to see that the equality impact assessment states that the
Government are looking at ways of easing the transition for families
and providing assistance in hard cases, but I should be grateful if the
Minister would tell us which options are under active consideration to
ameliorate some of the policy’s impacts. I would like the
Minister to say that he will take on board the concerns that I and
other Committee members have, and that he will work with his colleagues
to find a different way forward that retains the principle but has a
different way of putting it into
practice.

As
the Minister has said, none of the detail is in the Bill. I will
therefore not be voting against the clause at this stage because, even
with the clause in the Bill, it gives the Minister time to take the
matter away and come back with different proposals on how a cap could
be calculated and what benefits could be included in or excluded from
that calculation. As we know, that will be set out in regulations. The
Bill as drafted would allow for a number of those options, so I hope
the Minister can reassure me that he will take away my concerns and
come back with more palatable proposals that will not harm as many
people as the current proposals
would.

Sheila
Gilmore: I should like to take this opportunity in the
stand part debate to complete some of the thoughts I had earlier. There
is clear agreement among many of my constituents that people should not
get too much money for nothing, and that people who are not working
should not in some sense live a great life of

Column number: 981

luxury at the apparent expense of others. I have already said that we
sometimes make too sharp a distinction in debate between those who are
taxpayers and good people, and those who are not taxpayers, as though
they were completely different groups. Most of us are taxpayers, and
through measures such as VAT, many very poor people who are not working
are also taxpayers and are contributing to society. That distinction
worries me deeply, as it creates a notion that some people are less
worthy because they do not in any way
contribute.

The
issue that has come through in many contributions is housing costs,
which are part of a wider discussion that we cannot debate entirely
within welfare reform. Some worries that people express result from the
fact that another debate is going on about housing reform more
generally, and the conflicts are perturbing. Housing costs are a
serious issue. People who have high housing costs should not be
regarded purely as taking on those costs, or making those choices,
because they want to live more luxuriously without working. Many people
have little choice. I am amazed by how often people tell me that they
do not want to go into the private rented sector, even when the cost of
doing so would be covered by housing benefit, because they do not like
other aspects of that sector. Sometimes, however, they end up with no
choice.

On Friday, I
was speaking to a young woman who has been living in very overcrowded
circumstances with in-laws, with whom she does not particularly get on.
She has a small baby and a room that does not even have space for a
cot. I asked her whether she had considered going into one of the
private leasing scheme properties that the council might be able to
access for her. She answered, “No, I want to be settled. I want
a secure place to live; I do not necessarily want to be in the private
rented sector.”

There are many
people like that young woman, who are not saying, “Whoopee! I
could get a high-rent house somewhere because I have a small baby and I
am not working at the moment. I could get housing benefit to cover
that.” They are saying, “I don’t want that; I
would rather have an affordable rented house, if one were
available.” However, that woman has been a priority for eight
months and there has been little sign of anything coming her way, so
her choices are limited. If council or housing association houses are
not forthcoming, she might have no choice but to look into the private
rented sector in some form. As she is not currently working and as her
child is under one year old, she would receive housing benefit to cover
that. She may well end up being one of those people whom others look at
and say, “There’s someone who’s getting a lot of
money”, even though some of it is simply to cover her
rent.

This issue is
serious. The primary problem arises from housing costs, and not from
the huge generosity of other benefits, because when we consider each
element, they are not so outstandingly high. If, for example, as the
hon. Member for Cardiff Central has suggested, housing costs were taken
out of the overall cap, there would not be a major problem, except,
perhaps, for some outstandingly large families, who are very few and
far between. Equally, if child benefit were taken out of the cap, it
might substantially reduce—I do not know in what
numbers—the number of people who would be within the cap.
However, that shows up the cap for what it is. It will punish people
who have high housing

Column number: 982

costs—not necessarily through choice, but because of where they
live and their lack of choices. In my city, costs are high; it is not
that house rents are anywhere near as high as they are in London, but
the choice of alternatives is exceptionally limited.

The situation
will get harder and harder until we properly address how to provide
affordable housing. People with large families and people who have
exceptionally high housing costs will suffer. If we exempt them, many
fewer people will be covered by the cap and it will probably not have
much effect. If the cap is to make the alleged savings, it is likely to
do so to the detriment of some of those groups. They may have little
choice but to accept that, unless they can move easily—they
cannot do anything about family size, if that is why they hit the
cap—their disposable income will fall to a level at which their
financial position will be even more difficult. Is it supposed to be a
stick with which to beat people into working at a time when jobs are
not easy to come by? That aspect of the matter has not really featured
in today’s debate. There is an assumption that people will
simply be able to find work, but that is not necessarily an option that
is easily
available.

5.30
pm

Many
of the issues may go well beyond the scope of the Bill, but when we are
legislating, we must bear in mind who will be harmed. I accept that
people may easily be worked up into being resentful of one another,
sometimes because certain pictures are presented to them, but for real
people the situation is more difficult. We could make many exemptions,
perhaps through regulations, when the bookcase is filled in. The
Minister has spoken against putting exemptions in the Bill, but if they
were put into regulations, some of his objections on grounds of
complexity would disappear because they would still exist, but in a
different format; or we could have simplicity, and many of the
difficult cases that have been outlined by the previous speaker and
throughout the debate would not be exempted in any way, whether it is
the type of benefit or the type of household that is
exempted.

If there are
not exemptions, there will be hard cases out of simplicity, and that is
always a danger. Simple is attractive, and it is easy to say that
things should be made simpler—no one will disagree with
that—but simple rules sometimes give rise to hard cases because
people fall through the cracks. We must be clearer about how many of
the issues will be covered by regulations—that may yet come
out—and whether the Minister is holding to his view that having
many exemptions would be too complicated, and that there will be a cap
that will affect many of the groups to which reference has been
made.

Ian
Swales (Redcar) (LD): I want to speak briefly about the
benefit cap, and deprived areas. My constituency is mixed, and we even
have a Conservative councillor, but some parts are among the most
deprived in the country. An article in TheGuardian
earlier this year referred to a fifth generation being born into a
family where the previous four generations had never worked. They were
my
constituents.

The
root cause, of course, was long-term loss of manufacturing jobs in an
area that was built on manufacturing. My constituency is ranked 30th of
650 for unemployment. To recall a former right hon. Member

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for Chingford, people are getting on their bikes and going off to get
work, so instead of the problems in the south-east of housing shortages
and worries about school places, we have housing available and schools
closing. That is relevant, because I am worried that Government policy
and reaction to it are often about the south-east and big cities, and
not about the rest of the country. I shall give a few
examples.

First, the
difference between social rents, market rents and proportions thereof
is irrelevant in my area, where they are very similar. In fact, some
evidence suggests that housing benefit drives them all. Secondly, the
Bill contains provisions for under-occupancy. Last Friday, I met the
chief executive of the large social housing provider in my area who
said that in some areas he has problems getting people to take empty
social housing. To get a couple into a three-bedroom house in such
areas might be great for regeneration of the area, but there will now
be serious penalties for such tenants because of the under-occupancy
provisions. Those are examples of how national policy may not always
apply well, and we now have the benefit
cap.

The
Government are talking about a figure based on national earnings, and
we have heard at length today that the main elements are housing and
the rest. Housing costs vary dramatically across the country. Simple
mathematics says that if there is an overall cap and dramatically
different housing costs, there will effectively be a highly variable
cap on people’s non-housing living costs. It will vary a lot
across the country. Fairness should be at the heart of what we are
about, and such variation seems
unfair.

We
have heard at length about how often quite small families in expensive
parts of the country will have large bites taken out of their living
costs because of the housing issue. In my area it will not be a
problem. Even large families will probably get nowhere near the cap,
because housing costs are so
low.

The
cap could have two parts, as a few of the most recent speakers have
said. We have already talked about a housing benefit cap, which is part
of the provision, so why do we not get more creative? Rather than
having an overall cap of which housing is part, perhaps we could have a
cap on the non-housing part of the equation, too. That could lead to a
more equitable
solution.

I
accept that we must incentivise people into work. The heart of my
concern about the cap is that it will probably reduce the likelihood of
my constituents moving into work. Why is that? The Minister talked
earlier about influencing behaviour, so let us consider an out-of-work
family in my area. They will be paying relatively low rent—even
larger families may find that their benefits are not capped—so
to move into work they have two options. They could move into work
locally, where pay levels are quite low by national standards. I assume
that the universal credit will ensure that it is worth their while, but
I am still not sure how it will interact with the cap. Finding work
locally may not be easy, however. For example, the Financial Times
came to my constituency during the general election and a reporter
chatted to a few people on the street. They found a lady who had
recently managed to get a job cleaning the local supermarket. She was
delighted because there were 485 other applicants for the job, and she
was the chosen one. That says something about the availability of
work.

Column number: 984

My sample
family may want to move to an area where there is more work. Either
they do not have a job and move speculatively to that other area, and
assuming that the area has higher housing costs, which is highly
likely, the family income will fall if they are a significant family
affected by the cap; or if they have a job to go to, they may be
concerned that the job might not last and that they might find
themselves out of work in a new area with less money to live on. They
might then think, “Why didn’t I stay at
home?”

As
the hon. Member for Westminster North said, there is another perverse
incentive. People living in high-cost housing areas will undoubtedly be
incentivised to move to lower-cost housing areas where there is less
employment opportunity. We talk about the Bill’s basic premise
of trying to encourage people into work, but the clause has potential
counter-pressures.

I
agree that benefits should be capped. I am firmly behind that, but as
currently drafted, the clause is potentially unfair. It will not have
the intended consequence of encouraging people to go to areas where
work is available. Such movement of people and mobility of employment
is the key
thing.

There
are redrafting possibilities. I accept the need for simplicity, but the
numbers could be made to add up slightly differently. Before the hon.
Member for Dover jumps out of his seat, a slight improvement could
result in a cap system that does not cost any more, and might even cost
less, by reflecting the reality across the
country.

Chris
Grayling: I have listened carefully to the comments made
by hon. Members on both sides of the Committee, not only in the stand
part debate, but through the course of today. Let me start by reminding
everyone that we are considering a framework clause that simply puts in
place the mechanism for a cap to be introduced. It is no more, and no
less, than that. I hope that in the debate today the Opposition live up
to what I saw in the papers at the weekend—that they support the
principle of a cap and will not oppose the framework. I hope that I am
not disappointed, but if they decide to vote against the clause I will
relish a debate in the public arena, to argue the case for a cap and to
highlight the fact that the Opposition do not believe in capping
benefits. Perhaps that debate lies ahead; perhaps it does not. We will
find out in a
moment.

The
first issue is that of the principle I have set out. In the debate
about poverty and the impact of the changes, we are talking about a
plan to set a benefit cap at an equivalent annual income level, before
tax and national insurance, of £35,000. We are not setting a
poverty level cap that means that no one will have any money coming in;
we are setting a cap at a comparator level with people who are in
reasonably good
employment.

Kate
Green: Is the Minister not aware of the
Government’s commitment to the relative income poverty target,
which is a target set on median income equivalised by family structure
and
size?

Chris
Grayling: So that we can have a welfare system in which
people have confidence, we seek to set a benefit cap at a level that is
equivalent to an earned salary of £35,000 coming into the
household. That is a fair and sensible dividing line, beyond which the
state provides support only in exceptional circumstances. Various
issues have been raised about some of the challenges in that
mix.

Column number: 985

There is work
to be done, and I hope that my hon. Friends the Members for Cardiff
Central and for Redcar will be part of the discussions that take place
over the next few months to get the regulations right and to ensure, in
particular, that we have the right mechanisms to deal with hardship
cases. The Secretary of State made it clear on Second Reading that we
will need such mechanisms, and at local authority level we have put in
place an extra £190 million to provide support for people
affected by the changes we are making to housing benefit arrangements,
including the cap. I expect local authorities to use that resource in
cases where there is a particular challenge to
address.

We
also clearly need to look carefully at temporary housing. There are
mechanisms in the current system to address the costs of temporary
housing, and careful consideration needs to be given to ensuring that
we have the right mechanisms in place in the future. My hon. Friend the
Member for Cardiff Central was absolutely right about that. The
majority of people she talked about will be in receipt of DLA and will
therefore not be affected by the change, as we are obviously not
applying the cap to DLA households. The people on ESA who are
potentially affected, are likely to be those who are closer to the
workplace, and with the introduction of the Work programme and the
migration from incapacity benefit I hope that we can help that group to
find a path to work relatively quickly. I would expect those with more
serious health challenges to be in receipt of DLA as well, which is
not, of course, affected by the cap. Nevertheless, we need to carefully
consider whether we missed any issues when forming the policy, and I
hope that she will take part in those
discussions.

My
hon. Friend the Member for Cardiff Central also asked about the figures
for the increased cost of homelessness. She cited figures that she had
been told were Department for Communities and Local Government
estimates. Our impact assessment stated that the costs could not be
quantified because of the behavioural effects of the introduction of
the cap, and that remains the case. I have no clear evidence that
further information is available, but am happy to provide my hon.
Friend with more background on the information that we have. At the
moment we do not recognise any further figures beyond the detail in the
impact assessment because we simply do not believe, yet we can
understand fully, the behavioural effects of the measure in terms of
costs.

5.45
pm

The
clause is not primarily a cost-saving measure. It may save costs, but
fundamentally it is about creating a more credible welfare system. It
is about tackling the culture of welfare dependency in the country by
setting a clear limit to what people can expect to receive from the
benefits system. It is very much about fairness. Fairness applies in
both directions here. Fairness also applies to taxpayers, who pay for
the system. We do not believe that it is reasonable or fair that
households getting out-of-work benefits should receive a greater income
from benefits than the average weekly net wage for working households.
That is the core principle that we are seeking to put in place
here.

I do not
believe that we can or should write into an enabling clause in primary
legislation all the different caveats that have been brought forward
this afternoon. We need to work through the preparation of the
regulations

Column number: 986

so that we get it right. There will clearly be further debate about the
impact of the decisions that we make and about the detail of the
regulations that we bring forward. What I am asking the Committee to
back in the clause is simply the mechanisms to have that discussion, a
discussion in which all members of the Committee are welcome to
participate and to share their concerns so that we get it
right.

My
last point is for my hon. Friend the Member for Redcar. As he knows,
month by month I deal with the labour market statistics. We have
another day tomorrow. At every briefing meeting about labour market
statistics, my first question, after asking whether unemployment has
gone up or down, is about the north-east. I am genuinely concerned
about the north-east. There are many parts of the country that have
been badly affected by unemployment through the recession, but the
north-east remains one of my biggest concerns. It is an area which, as
he has rightly said, lost part of its economic base, and we desperately
need to see growth. I was encouraged by the regional grants announced
recently for manufacturing research, for new manufacturing capabilities
and for investment for some of the industries on Teesside. All that is
very important.

While I accept
that in some cases people may seek to move away from the north-east to
find work elsewhere, I would much rather that we pursued an agenda of
growth that brought more successful international businesses to the
north-east and also encouraged the growth of more domestic, local,
entrepreneurial-based businesses, so that we create the kind of jobs
that my hon. Friend wants for his constituents. That is something that
I feel strongly about. It is something that I know colleagues across
the Government feel strongly about. It is one of the things that bring
us together as a coalition, and I give him the assurance that we will
work hard to ensure that the flows are going his way rather than the
other
way.

This
is a framework clause that will start a process of filling in the gaps
over the next few months. The discussion process we will go through is
open to Members on both sides. I commend the clause as a way to get
that discussion
going.

Clause
94

Benefit
cap:
supplementary

‘(4) In section 150
of the Social Security Administration Act 1992 (annual
up-rating of benefits) after subsection (7) there is
inserted—

(7A) The
Secretary of State—

(a)
shall in each tax year review the relevant amount specified under
subsection (5) of section 93 of the Welfare Reform Act 2011 (benefit
cap) to determine whether its relationship with estimated average
earnings and any other factors specified in subsection (6) of section
93 of the Welfare Reform Act 2011 (within the meaning of that section)
has changed; and

(b) after that
review, must, if the conclusion of that review is that estimated
average earnings and any other factors stipulated in subsection (6) of
section 93 of the Welfare Reform Act 2011 have increased in relation to
the amount specified under subsection (5)

Column number: 987

of section 93 of the Welfare Reform Act 2011, include in the draft of an
up-rating order provision increasing that amount in proportion to the
increase in earnings; or

(c)
after that review, must, if the conclusion of that review is that
estimated average earnings and any other factors specified in
subsection (6) of section 93 of the Welfare Reform Act 2011 have
decreased or remained unchanged in relation to the amount specified
under subsection (5) of section 93 of the Welfare Reform Act 2011,
include in the draft of an up-rating order provision increasing that
amount in proportion to the general level of prices under section 150
of the Social Security Administration Act
1992.”.’.

I
will be brief. On the assumption that a form of a benefit cap goes
ahead, which I suspect will be a butchered form, I want to probe the
Minister on his thinking about the uprating formula. We know that he
intends to have an uprating formula. At the moment, this provides for
an uprating by inflation, but what is the logic behind that? The whole
point of the benefit cap is to peg benefits entitlements to average
earnings, so what is the logic in looking at an uprating formula that
will be linked to inflation rather than linking it to earnings and the
relationship between earnings and in-work benefits that have to be
included in the total? It seems illogical to establish a benefit link
to earnings and then not to uprate it with earnings. Has the Minister
made any planning assumptions on what the implications of those
different options would
be?

Chris
Grayling: We have said that the level of the benefit cap
should be set to reflect estimated average earnings. As currently
drafted, clause 94 will require us to review the level of the cap each
year to see whether its relationship with estimated average earnings
has changed. Following that review, we will be able to increase or
decrease the level of the cap, if we consider it to be
appropriate.

The
amendment similarly requires the annual review of the level of the cap.
It also says that if the review finds that estimated average earnings
have risen, we would be required to uprate the level of the cap in line
with the increase in earnings. Should estimated average earnings be
found to have decreased in value or stayed the same, the amendment
requires us to increase the level of the cap in line with the rise in
prices.

As we are
setting the level of the cap to reflect the average weekly wage, it is
right that these respective levels be regularly reviewed to determine
whether the relationship between the two has changed. Where the
relationship is found to have changed, the powers we are taking will
ensure that we are able to increase or decrease the level of the cap,
when it is considered necessary.

The amendment
goes further than we intend and requires that where average earnings
have gone up, we increase the cap by the same proportion. Such
compulsion is not appropriate. There is no statutory requirement to
uprate jobseeker’s allowance or other out-of-work benefits, so I
see no need to introduce one for the level of the cap.

We also need
to be mindful of the operation of the benefit system. Our intention
throughout the reforms is that it should be simple and clear. We have
said that benefits should be capped with reference to the level of

Column number: 988

the average earnings and not at the specific average earning figure
itself. Fixing the level of the cap to the exact level of average
earnings or increasing it in precise proportion to their increase would
result in a potentially cumbersome
measure.

Clause
94 applies a link to earnings. The amendment creates an additional link
to prices as well. In effect, we would end up with a parallel process
of both earnings and prices, which is clearly a technical flaw in the
amendment.

I
do not agree with the reasoning behind the hon. Lady’s approach.
Uprating the cap in line with the increase in prices if earnings were
found not to have risen would give us a dual mechanism for uprating,
which is not sensible. We should either have one mechanism or the
other. The cap is intended to promote fairness with those in work.
Wages are not automatically increased in line with prices. If estimated
earnings fail to rise thereby triggering an increase based on prices,
it would create a disparity in treatment between those in work and
those on benefit. We could have a statutory mechanism that requires an
increase in line with prices. Indeed, given that prices have been
rising faster than earnings over the past few months, it would require
us to increase the level of the benefit cap faster than the rate at
which earnings themselves are increasing, which would create an
inappropriate
conflict.

Our
intention is to review the cap annually and to make changes where it is
appropriate to do so. Clearly, we intend to adjust the cap as
circumstances change. The amendment is not sensible for two reasons.
The duality in terms of prices and earnings is not right. Nor is it
right to tie the hands of a Government in primary legislation, so that
they have to make changes to what are effectively the level of payments
through the benefit system in future when circumstances can be so
varied, depending on what is happening in the outside world and in the
economy at a particular
time.

Ms
Buck: I thank the Minister for that response. I tabled a
probing amendment to seek the Government’s view. Although I see
the logic in what the Minister has said, we are in a slightly
complicated position, because the Government have brought forward a
hybrid proposal, which, for the first time, links benefits to average
earnings and they have to accept some of the consequences of doing
that. On occasion, it will leave people in an anomalous position. While
I accept the point about complexity, it may be that in the future, his
Government or another Government may seek to make changes to benefit
levels and to alter the uprating of benefits, which would have knock-on
consequences for a benefit cap and create their own anomalies.
Obviously, reporting on how things will work out is something that we
will watch closely in the short
term.

Something
we did not explore, which is worth bearing in mind, is an interesting
anomaly—the level of earnings against which the cap will bet set
and presumably uprated will itself be amenable to change in, for
example, the nature of the work force as well as in earnings. Thus, if
we had more single earners in the work force, the consequence would
potentially be to lower average earnings, therefore bringing the cap
down.

Monitoring
will need to look at earnings and prices but also at the extent to
which what happens to earnings is a result not only of earnings growth
but of completely

Column number: 989

unrelated changes in the composition of the work force, which could have
their own knock-on consequences. I hope that Minister is nodding and
that he is committed to ensuring that any monitoring of the movements
in earnings and, consequently, in the benefit cap will take into
account some of those complexities and not only the headline figures
for inflation and earnings. No doubt we will turn to that later. I beg
to ask leave to withdraw the
amendment.

Amendment,
by leave,
withdrawn.

Clause
94 ordered to stand part of the
Bill.

Clauses
95 and 96 ordered to stand part of the
Bill.

Clause
97

Payments
to joint
claimants

Stephen
Timms: I beg to move amendment 249, in
clause 97, page 64, line 34, at
end insert—

‘(3C) For the
purposes of paragraph (3B), elements or sub-elements of the universal
credit award that are paid in respect of children, including any amount
in respect of childcare, shall by default be paid to the main carer of
the children, except in prescribed
circumstances.’.

The
Chair: With this it will be convenient to discuss new
clause 9—Payment of universal credit
elements—

‘(1)
Any amount of the universal credit award that is paid in respect of
rent charges shall by default be paid to the person liable for that
charge, except in prescribed
circumstances.

(2)
Any amount of the universal credit award that is paid
in respect of a disability shall be paid to the disabled person or to
that person’s designated carer, except in prescribed
circumstances.

(3) Regulations
may provide further circumstances in which a proportion of universal
credit may be payable to a particular
individual.’.

Stephen
Timms: I am pleased, Mr Gray, that you have grouped the
amendment and new clause 9 together—thank you for doing so. They
relate to different elements of the universal credit award, although
both address the same question, so debating them together is
appropriate.

The
amendment and the new clause are intended to ensure that the single
universal credit payment can be split between two or more individuals
in certain circumstances. That might appear a rather technical matter,
but such detail could have significant consequences, so it is important
that the system includes sufficient provision to allow such a
split.

The
amendment specifies that any element or sub-element of the universal
credit award paid in respect of children should by default be paid to
their main carer. Any amount under clause 10, which is entitled
“Responsibility for children and young persons”, would be
covered by the amendment. In addition to an amount for each child, it
is expected to include an additional amount for children with a
disability.

I
also expect some parts of payments under clause 12 to be covered by
this proposed provision, a particular example being the amount in
respect of child care, which is specifically referred to in the
amendment. The Secretary of State has promised us details before the
Bill leaves Committee of how the Government propose to support child
care in the universal credit. We are looking forward to seeing those
details and to debating the proposals next Tuesday. Another example
might be

Column number: 990

free school meals. We have already tabled a new clause on that, which we
will certainly be debating before the Committee
concludes.

The
amendment specifies that those elements should be paid to the main
carer “by default”. However, exceptional circumstances
might make it more appropriate to pay the money to someone else, and
the amendment recognises and allows for
that.

New
clause 9 identifies two additional circumstances in which payments
should be split. First, any amount paid in respect of rent ought to be
paid to the person who is liable to pay that rent. It might well be
that one member of a couple, for example, pays the rent, but the other
is the main applicant for universal
credit.

6
pm

Secondly,
new clause 9 specifies that any amount in respect of a disability
should be paid to the disabled person, or to that person’s
designated carer. Clause 12 outlines three circumstances in which a
component of universal credit may be paid in respect of a disability:
first, where the claimant has limited capability for work; secondly,
where the claimant has limited capability for work and is required to
undertake work-related activity; and thirdly, where the claimant has
regular and substantial caring responsibilities for a severely disabled
person.

Again, the new
clause stipulates that those elements of the award should be payable to
a specific individual “by default”, as there may be
circumstances in which that arrangement would be inappropriate, and it
allows for that. It also includes provision for additional
circumstances to be added to the list, should they be necessary. For
example, in certain circumstances, it might be appropriate to split the
standard allowance between the two members of a couple. I think that
that is conceivable, and if such circumstances arose, the new clause
would cover that eventuality.

It is clear
why split payments could be necessary: universal credit will replace a
range of existing benefits, which are currently often claimed by
different members of a household. Certain benefits in respect of
children—for example, the child care element of the child tax
credit—are usually paid to the main carer. We have supported the
principle of a universal credit, but whereas payments currently go into
a household and are split between different recipients, that splitting
could be lost. I suggest to the Minister that that potential difficulty
can be readily overcome by splitting the single award between more than
one recipient, as proposed in the amendment and the new
clause.

The
case for splitting payments is particularly compelling for awards made
for children. A strong body of evidence suggests that the money is a
good deal more likely to be spent on the children if it is paid
directly to their main carer. Generally, though not invariably, that is
their mother. Platform 51, the organisation we used to call YWCA
England and Wales, has lobbied on this issue, and it states that the
Government’s current
proposal

“does
not recognise the most effective way of ensuring that money allocated
for children reaches them through paying it to the main
carer,”

and
it goes on to add that the system of paying money to the main
carer,

“has
been applied previously to child benefit, family credit, child tax
credit and the childcare element of working tax
credit”

Column number: 991

and that
it

“has
been proven to be most effective. Platform 51 believes Government
welfare policy should promote gender equality and also recognise the
reality that, in the majority of families, women are still the main
carers.

“Furthermore,
in low/moderate-income families, it is still mothers who tend to
shoulder responsibility for meeting children’s day-to-day needs
and evidence shows that women tend to have responsibility for
purchasing food and items for
children”.

Harriett
Baldwin (West Worcestershire) (Con): Does the right hon.
Gentleman share my understanding that there is no proposal in the Bill
to change the person to whom child benefit is
paid?

Stephen
Timms: That is my understanding. Platform 51 is
clear about that, but I think that its argument is that the principle,
which is well tried and accepted by the Government for child benefit,
should also be applied to those elements of universal credit that are
paid in respect of children, for the same reason. A connected and
equally important point has been made by Oxfam. It says that by clearly
labelling money paid for children, it is more likely to be spent on
them.

There
is a broader issue around gender equality. The main carer of children
is usually their mother. Oxfam points out that, among claimants who are
in work, 86% of main carers for the purpose of child tax
credits are women. As the hon. Member for West Worcestershire said,
they will continue to receive the child benefit. The argument is that
they should receive the child tax credit, and its equivalent under
universal credit. Clearly, income is not always shared equally between
the two members of a couple and, indeed, in answer to a written
parliamentary question that my hon. Friend the Member for Stretford and
Urmston tabled, to which she received an answer on 14 March, the
Minister said:

“Research
has suggested that, particularly in low-income households, the above
assumption with regard to income sharing within couples is not always
valid as men sometimes benefit at the expense of women from shared
household income.”—[Official Report, 14 March
2011; Vol. 525, c.
126W.]

If
the universal credit payment is not split or is not capable of being
split, there is a particular danger for women who experience domestic
abuse. Sadly, that often extends to what is sometimes called financial
abuse. According to a 2008 survey, again carried out by
Platform 51, about a third of women using its YWCA England
and Wales centres had experienced some form of financial abuse. It
stated:

“The
proposed payment method could have an impact on levels of financial
abuse, and we have asked the Government to review this but we have not
as yet seen any such assessment. The Government has suggested that in
cases such as this where there is proven abuse of the money, they would
look to redirect the payment urgently (as can be done now). This,
however, puts the onus on the person experiencing abuse to take
individual action, which can be very difficult, and is unlikely to
happen in many cases. It is far better to ensure, as far as possible,
that the potential is minimised in the first
place.”

New
clause 9(1) is intended to deal with circumstances in which the person
receiving universal credit is not the person liable to pay the rent.
Again, there are very clear gender equality implications. Oxfam
suggests that, unless the amount payable in respect of rent is paid to
the person liable for that charge, that too could have significant,
negative consequences for women. It highlights, for example, the
potential consequences for lone parents who join a new partner, and
states in its briefing:

Column number: 992

“Cases
of concern could include a lone parent with a new partner moving into
her rented property; the couple will need to claim UC jointly, but the
lone parent may not immediately be ready to share tenure rights. If the
new partner were paid all the UC, this could result in insecurity of
housing tenure for her and her children. In a 2001
study”—

that
was some time ago—

“some 1 in 4
cohabiting men and women said they had moved into accommodation in
which their partner lived—but this was higher for men in the
separated/divorced group. For 1 in 3 men and women (nearly 1 in 2 older
women), when they started living together as a couple the accommodation
was in their own name only. Another study included examples of social
housing tenants and owner-occupiers who did not (yet) wish to add their
new partner’s name to their tenancy or mortgage agreement.
Housing tenure is not always joint among couples, especially
cohabitees.”

In
those circumstances, there is a compelling case for allowing payments
to be made to the person who is actually liable to pay the
rent.

Tackling
domestic abuse and women’s independence are not the only reasons
why the changes in our proposals make sense. It could be that, for
budgeting purposes, a couple would prefer certain elements, such as the
rent, to be paid to one member of the couple rather than to the person
who otherwise receives universal credit. That was also said in a
briefing sent to us from Save the Children about the child element of
the award. It
states:

“Splitting
payments would also suit traditional budgeting habits amongst low
income families. There is a history of paying entitlements intended for
the maintenance and benefit of children to the main carer (for example
Child
Benefit).”

That
picks up on the point made in the intervention. The briefing
continues:

“Splitting
payments is likely to make the transition from benefits/tax credits to
Universal Credits smoother for
claimants.”

At
the very least, there should be provision for such an arrangement to be
put in place. It seems appropriate that any amount, in respect of a
disability, should generally be paid directly to the person who has the
disability or to their carer, rather than the person receiving
universal credit for that household, if that is a different
person.

In
conclusion, the merits of a universal credit bringing different
benefits together are very clear. We have discussed them already in
Committee and I do not think that they are contentious. However, there
is a risk that if we are not careful there could be unintended
consequences that are entirely preventable. In particular, there is the
potential to undermine the position of some women whose income will be
dependent on universal credit, of which the main recipient is somebody
else. Addressing those concerns does not require us to abandon the
principle of a single payment or universal credit. It does not require
big changes to the Government’s proposals. It requires that the
Minister and the Department can calculate the amount of any award that
is paid in respect of certain circumstances—I suggest that those
should be rent, disability or children—and then pay those
components to an individual other than the main applicant for universal
credit.

The amendments
would make relatively minor operational changes, but they could have
very substantial and positive implications for some claimants,
particularly the most vulnerable. I read the note on regulations to
find out whether it was the case—it was not completely clear,
but maybe the Minister can reassure me—that the Minister intends
to do what I have described and that

Column number: 993

the regulations will provide for that. I do not expect the Minister to
have difficulty with the principle that I have set out, but the
amendments and the new clause would allow for that appropriate
splitting to be made when it is
needed.

Kate
Green: I endorse my right hon. Friend’s comments
and wish to add one or two points that I hope will emphasise to the
Minister just how important this issue is, particularly for women. This
is not a slight or trivial issue, but one which causes considerable
concern, particularly in the context of universal benefit. The decision
about where money goes is much more significant when the eggs are all
in one basket. The design of the benefit integrates different elements
of financial support. We must recognise that it brings with it some
dangers that, operationally, it needs to be possible to
reduce.

I hope that we
will not see—I do not believe from anything I have heard from
the Minister that this will be the case—that the prevailing
concern is administrative convenience. We must aim for a position that
enables couples to be confident and stable in their personal financial
obligations and commitments, provides properly for the protection of
children and other vulnerable members of the household, and promotes
financial independence for women and for men overall.

What will
happen if one member of a couple wants a particular element of
universal credit to be paid to her or to him, and the other member does
not agree? Currently, sometimes in relation to benefits for children,
there is a race to be the first person to identify themselves as the
main carer, and therefore to receive the benefits. I am interested to
know the Minister’s intentions, because I understand that he
intends to allow couples to have that choice in some circumstances.
What will happen when the couple cannot reach agreement about the
exercise of that choice? We know already that couples are becoming more
likely to keep their financial affairs separate. Joint savings and
investments, and indeed joint debts, are on a downward trend in couple
households
today.

6.15
pm

On
pressing on wholesale with payments to only one member of a couple, I
am keen to highlight a few inconsistencies between what the Government
might be doing by taking such an approach and their intentions and
priorities elsewhere. It is possible that, by weakening the financial
independence of women in particular, by making a payment to one member
of the couple—it is likely to be the man—we will
undermine the formation of committed couple relationships. My right
hon. Friend alluded to an aspect of that a moment ago when he talked
about housing obligations and how people wish to be confident that
their home would not be put at risk by financial support for the rent
being paid to another member of the
household.

Rolling
everything up and paying it to one person in the household is quite a
risk for someone who is entering a new relationship to contemplate.
Their current income stream might be taken from them and paid to the
other member of the household. That will be a risk factor in terms of
supporting committed couple relationships, which is what the Government
desire. The evidence is clear that financial security is an important
factor for women when deciding whether or not to form a new

Column number: 994

relationship, and it is financial independence for women within couples
that strengthens the stability of a couple
overall.

My
right hon. Friend mentioned the huge importance of ensuring that money
for children is more likely to reach them. We have so much evidence
over many decades that that has always been the case when the money has
been paid to the children’s direct carer, who today
remains—typically, though not invariably—the mother. We
therefore want money for children to be directed to the main carer, to
ensure that children’s material well-being remains a
priority.

As
my right hon. Friend has said, labelling a benefit as a payment for
children helps that money to be spent on children. We all know of
couples who describe what they do with their child benefit. Low-income
families will say, “I spend it on shoes,” or they use it
to cover the lumpy expenditure that they might not be able to meet
otherwise. Better-off families may not spend it immediately, but they
will set it aside for their children. It is clear that labelling is
important. Paying benefits that are specifically for children to the
main carer is a way of getting resources to the person in the couple
who is less likely to have independent means. That also enables them
to enjoy some additional financial autonomy in relation to
the care of the
children.

Finally,
when couples exercise choice in relation to where joint payments are
directed, that choice typically favours the man. We have good examples
from the pension credit. Of 227,000 partnered recipients of the pension
savings credit, 77% of couple claims are received by the man. Moreover,
of 205,000 partnered recipients of the pension guarantee credit, 81% of
the payments are to men. Gender imbalance seems to be the default
position. If we are concerned to ensure that payments meet the payment
obligations that are more likely to be incurred by the woman in a
couple—whether for her rent or for the care of her
children—there must be a clear mechanism to allow that money to
get to that woman, so that she can to meet those
obligations.

It
would be ironic if all the Government’s intentions for the
introduction of universal credit to promote more independence from the
state actually reduced independence within families, particularly for
women. That will happen if we are not careful and thoughtful about the
proposal. It has been a long-fought battle for women to secure some of
that financial independence, from ensuring in the 1940s that payments
for children could be paid directly to the main carer, to our campaign
in the 1980s for independent taxation. I hope that the Minister will
take this opportunity to ensure that universal credit will represent
another step forward in sustaining and promoting women’s
financial independence. I, along with my right hon. Friend, look
forward to hearing how he intends to allow that to happen in
practice.

Chris
Grayling: I shall both disappoint and, I hope, reassure
Opposition Members. As we have heard, the amendment and the proposed
new clause seek to replicate the current system in tax credits of
making payments of child tax credit on the child care element of
working tax credit to the main carer of the children. New clause 9
would require the Secretary of State to pay an amount for rent to the
person liable to pay that charge and to pay amounts in respect of a
disability to the disabled person or their carer. The new clause allows
exceptions

Column number: 995

to those circumstances to be prescribed and other circumstances for
paying a proportion of universal credit to a particular individual to
be set out in regulations.

I absolutely
understand Opposition Members’ views: their arguments are
perfectly reasonable, but routinely dividing payments—I
emphasise “routinely”—contradicts one of our
principles for the universal credit, which we have touched on in
earlier debates. The payment proposal was the subject of one of our
policy briefing notes, which was made available to the Committee and on
the Department’s website. We have outlined our intention to give
universal credit as a single payment to a household. We think that that
is important so that the household can see clearly the effect of their
decisions about work on total household income and so that claimants
can take responsibility for budgeting. We think that as far as
possible, universal credit should mimic payments of salary for paid
employment, as part of the move towards work that we
want.

For
single-person households, it is straightforward: the person making the
claim receives the money. We ask that couples decide between themselves
who will receive the money. We think that the people within a household
are best placed to make the money management choices that are most
appropriate for them. It is not for Government to dictate how a family
spend their
money.

It
is also important to remember that under universal credit, claims by
couples will be joint claims. In the current benefits system, JSA
excepted, one member of the couple makes a claim and the other is
treated as their dependant. That will not be the case under universal
credit. It is not right for one member to have access to the benefit
and the other not to. They will be jointly entitled, which is critical
to consideration of both new clause 9 and amendment
249.

In
practice, a single payment must be made to one account, which is why
couples need to decide what arrangements suit them best. They might
have a joint bank account that allows them both access to the money, or
they might choose to make alternative arrangements. The hon. Member for
Stretford and Urmston is right: many couples choose to be financially
separate in managing their
affairs.

Ian
Swales: Reading the clause again, I see that there is
clear provision for part payments and a sense that election could be
involved. Will the Minister clarify what the provision
discussing

“all or any part
of a payment”

might operate? According
to his clear exposition, it will be a one-payment, one-person
approach.

Chris
Grayling: The hon. Gentleman is correct, and I was going
to talk about that. It is important that we do not create a system that
is completely inflexible. There are, of course, circumstances in which
a household situation will require us to form a view on how best to
handle the payments. One would hope that that could be decided by a
couple together, but in some circumstances—perhaps for some of
the reasons that Opposition Members have discussed in their
comments—it might be necessary to divide a payment between two
parties.

Column number: 996

Ian
Swales: On a point of clarification, the Minister says
that the Secretary of State will decide that. Is there any possibility
that claimants will be able to elect for payments to be separated? He
did not say that in his answer.

Chris
Grayling: It is not our intention that that should be our
approach, but we will not make it impossible in regulations for that to
happen. We have left open flexibilities so that we can offer numerous
different permutations. Although our default preference is to make a
single household payment in most cases, we have sought to leave open
flexibilities. We are aware that there are some people who might
struggle to budget effectively and for whom a single payment to the
household is not appropriate. We are carefully considering how to take
into account those people’s circumstances. Dividing payments
between two or more parties by exception is certainly being considered
as a part of that process. We are working it through and we will
provide more information on the conclusions that we reach in due
course. I am very happy to receive input from members of the Committee
about that.

On amendment
249, I am aware of the body of evidence that suggests that money paid
to the main carer and explicitly labelled as being for children is more
often used to benefit those children. The hon. Member for Stretford and
Urmston is absolutely right about that. We are considering how best we
can display information about how a claim is made up, so that claimants
are aware what they are receiving and for which needs, and labelling
elements might be an important part of that. Of course, there is no
question but that child benefit payments are being retained outside the
universal credit; in the vast majority of cases, those payments go to
the mother and they are explicitly labelled as being related to the
upbringing of children.

The other
important point that members of the Committee should note is that the
power in section 5(1)(i) of the Social Security
Administration Act 1992, which will apply to the universal credit by
virtue of schedule 2 to the Bill, contains a broad power that allows
regulations to set out the person to whom a benefit is paid. That power
could be used to provide for payments to be split and paid to different
people if we or a future Government wished to do so.

Consequently
the amendments that the right hon. Gentleman has tabled are not
necessary, because the powers are already there in the 1992 Act and in
the terms of the clause. We are not closed-minded in any way at all to
the issues that he and the hon. Lady have raised. More often than
not—in the majority of cases—we want to be able to treat
the universal credit as a straightforward single household payment to a
couple who are perfectly capable of managing their own affairs and who
can decide for themselves about where they want the money to be
paid.

Stephen
Timms: I do not think that I have entirely grasped what
the Minister is proposing. He says that recipients can choose, but if
they wish the money to be split in a particular way, he was saying, I
think, that he would not normally permit that. I do not quite
understand why. If the process is about choice, surely couples ought to
be able to choose how the payment is split between
them.

Column number: 997

Chris
Grayling: Obviously, there is also the issue of how we
manage a single payment split in two directions to two bank accounts
with a single joint assessment, but the measures in the Bill do not
preclude any options. Our policy position is that we expect to make
single payments to single households, except in unusual or exceptional
circumstances—where there are particular reasons such as
hardship or relationship breakdown, or reasons that might be determined
individually by an adviser on the ground dealing with an individual
case—where we have left in place the provision either to make
individual household payments on a different basis, or group payments
on a different basis. We are working through the detail to establish
how best to deploy those powers.

I can reassure
the right hon. Gentleman that the powers that his amendments seek to
establish exist already: in the 1992 Act, which will apply to the
universal credit via schedule 2 to the Bill, and in the flexibility in
making regulations. Although we might differ on the approach, it is not
our intention to have large numbers of people electing to have split
payments—our default preference is to have single
payments—but we have left in place the flexibility to have split
payments where there is a very good reason to have
them.

Stephen
Timms: I am disappointed by that response and I think that
a lot of people following the proceedings of our Committee will also be
disappointed by it. There is agreement across the Committee that paying
child benefit to the main carer has worked very well; the intervention
by the hon. Member for West Worcestershire drew attention to that. By
extension, all my amendment is proposing is that the elements of
universal credit that are specifically related to children should also
be paid to the main carer. It will be quite a significant step
backwards if that cannot happen in normal circumstances.

I am grateful
to the Minister for telling me that if another
Government—perhaps a rather more enlightened
Government—is elected before too long, there are powers that
will enable my proposal to be implemented, but I am disappointed that
the present Government seem to want to apply such a retrograde
policy.

The
amendments and the new clause were tabled for probing
purposes, and I do not intend to press them to the vote. However, many
people will want to reflect on what the Minister has said, and when we
return to the subject, they will urge the Government to take a
different view and use the powers that the Minister assures us they
will have to allow the sort of splitting for which we have argued. I
beg to ask leave to withdraw the amendment.

Amendment,
by leave, withdrawn.

Clause 97
ordered to stand part of the Bill.

Clause
98

Payments
on
account

Ms
Buck: I beg to move amendment 250, in
clause 98, page 65, line 6, at
end insert—

‘(3) Where there
is insufficient information to calculate entitlement to the full amount
of universal credit, the claimant shall continue to be paid an amount
in respect of any component or components for which there is sufficient
information to

Column number: 998

calculate eligibility, with these components corresponding to the
elements in sections 9 to 12 of this Act and/or to any appropriate
sub-elements as specified in regulations, except in prescribed
circumstances.’.

With
this amendment, I seek guidance from the Minister on the capacity of
the universal credit system and the Government’s motivation. I
want to avoid the predicament or complication of one element of a
universal credit application that results in delay or temporary
suspension leading to a household being left destitute, with all the
other components of its universal credit payment disappearing at the
same
time.

6.30
pm

As the benefit
system operates now, one of the few plus sides to the complexities
within tax credits and benefits system is that if something goes wrong
with one element of the system, although there are exceptions for the
most part, it does not necessarily mean that all the family’s
income stops. For example, if a family is asked to present their new
baby’s birth certificate and it goes missing, additional
payments in respect of that child might not be paid, but it does not
mean that the household’s housing costs will be stopped, which
can give rise to undesirable consequences. If there is a complication
with the equivalent of a child tax credit or any child care support
that might be forthcoming under universal credit, it would not mean the
suspension of benefits in respect of their children.

A number of
people in the advice and other sectors are concerned that the provision
effectively firewalls the various components of universal credit. In
evidence to the Work and Pensions Committee, Family Action said that
that was a particular worry and pointed out that, although the
simplification agenda of universal credit was welcome and important,
the most overriding concern was that families should not be left with
no income. Family Action suggested that it should be possible to ensure
that the components that make up universal credit are separately
tracked, so that difficulty with one strand of those payments does not
necessarily result in the suspension of the entire universal credit. Is
any of this technically possible? In response to questions from the
Work and Pensions Committee, the Secretary of State said that if we
started firewalling the different elements of the benefit, all the
advantages would immediately be lost. He
stated:

“The
trouble with things such as firewalling and the way payments are made
within the individual elements is that you then, almost immediately,
start to lose the whole point of the Universal Credit, and you start
subdividing
again.”

I
understand that, and it is not a silly point. We all accept that one
strength of the universal credit is simplification. I know that the
Government have incredibly high hopes that there will be no
administrative problems with universal credit, but they must understand
that even with a vastly simplified system, Labour members of the
Committee fear that any payment system that involves millions of people
and human circumstances is simply bound, under some circumstances, to
have complications, whether it is the claimant’s fault or the
fault of the IT or administrative
system.

It
is crucial that where things go wrong, however rarely, it does not
leave people destitute. It now seems that if people are left without
universal credit under the new unified system, they will be in greater
financial

Column number: 999

difficulties; there may be fewer of them, but they will be in greater
financial difficulties, and of course that has knock-on consequences,
which perhaps the Minister could explain; perhaps he could also let us
know the way around them. There would be knock-on consequences for
demand for all kinds of emergency payment systems—for those
within the elements of the social fund that are retained in DWP, and
for the local authority administered discretionary elements of the
fund—and there would be additional pressure on advice
services.

I
do not doubt for a second that the Government want to prevent those
consequences. I am not challenging the Government’s motivation,
but there is a very real risk, and it would be remiss of the Government
not to find ways of addressing it and making sure that people are not
inadvertently left in the most desperate financial circumstances. I
look forward to hearing what the Minister
says.

Chris
Grayling: That was a valuable, brief debate. It is welcome
that the hon. Lady has raised the issue, and I hope to reassure
her.

The
amendment seeks to ensure that when a claim for universal credit cannot
be determined immediately due to a lack of information or evidence,
those elements of the benefit that have been determined can be paid to
the claimant. We know that elements of universal credit include a
standard allowance, an allowance for children, housing costs and
elements related to other particular needs such as disability. If there
is a delay in calculating one of the elements, payment for the elements
that have been determined should commence and continue. We recognise
that that is an issue. It needs to be carefully considered, and it
needs to be dealt with in the final design of the universal credit. I
can confirm that we are looking at it as part of the detailed planning
and design work that we are doing for universal credit, and we will
seek to have a mechanism in place that addresses the issues to which
the hon. Lady
referred.

I
want to reassure members of the Committee that payment-on-account
powers in clause 98 allow some benefit to be paid when an award cannot
be determined in full. Regulations will set out detailed provisions on
when such payments may be made, and I think that clause 98 does what
the hon. Lady asks. It is sufficiently wide to enable such payments to
be made and her amendment, which is probably a probing amendment, is
not technically
necessary.

There
will always be some cases in which all the evidence for a benefit claim
is not available immediately. That can happen for very good reasons,
and we need a system that is responsive to and reflects that
possibility. Generally speaking, I do not think it is unreasonable to
say that anyone who claims a benefit should, where possible, provide
sufficient information and evidence to support their claim. We have to
have a system that is balanced, fair and affordable for the taxpayer,
but that also helps those in genuine need and is sufficiently flexible
to deal with the kind of issues that the hon. Lady talked
about.

With
the rationalisation of many benefits into the universal credit, we will
be able to provide a streamlined service, and we expect that delays
caused by the need to gather informational evidence will be
substantially reduced. The key point to make is that, quite apart from
making provision in the design of the universal credit for the

Column number: 1000

issues that the hon. Lady has raised—for example, for cases where
evidence of housing costs is still outstanding—we have
payment-on-account provisions in the Bill, which will allow some
payments to be made. There is no question of anyone being left
completely high and dry. We will work hard on the design of the
universal credit over the next few months, and prepare regulations to
make sure that we have addressed the issues that she is concerned
about. I hope that gives her sufficient reassurance. She has raised an
important point, which we recognise, and we will take steps to address
it.

Ms
Buck: I very much welcome that recognition, and I am
relieved and encouraged that the design of the IT system will enable a
form of firewalling to be built in. For clarification, I assume that
what the Minister says means that all the distinct sub-elements in
universal credit—the housing, children, and disability elements,
and so forth—could be separately identified in the design of the
system. That is good, though slightly at odds with what the Secretary
of State told the Work and Pensions Committee. If that means that more
thought has been given to the issue in the intervening period, that is
extremely
welcome.

I
just emphasise two points. Of course, it is right that claimants have a
duty to provide supporting evidence. However, with the best will in the
world, even in a system where the gateway is intended predominantly to
involve IT, providing hard and supporting evidence is often where the
problem arises. Evidence goes missing in Jobcentre Plus now. I was
probably slightly scarred by Westminster council’s outsourcing
of its housing benefit to Capita. At one point, 28,000 items of
unopened post—evidence—disappeared. It was stacked up in
different buildings, and nobody was getting any answers. As a
consequence, huge numbers of people were left without payments.
Although it is right and encouraging that the Minister is saying that
payment on account will deal with those problems, if people do find all
their benefits suspended, it will put a considerable burden on ensuring
that the payment and accounts system responds more quickly and robustly
than at
present.

The
Minister is clearly sympathetic to the principle and the point that we
are making. We look forward—as we do in so many other
respects—to being reassured that the specifications for the IT
system will be sufficient for the system to carry the burden that is
put on it. With that, I beg to ask leave to withdraw the
amendment.

Amendment,
by leave, withdrawn.

Clause 98
ordered to stand part of the
Bill.

Clause
99

Power
to require consideration of revision before
appeal

Ms
Buck: I beg to move amendment 251, in
clause 99, page 66, line 16, at
end insert—

‘(10) In section
5(1) of the Social Security Administration Act 1992
(regulations about claims and payments), after paragraph (r), there is
inserted—

“(s)
for the making of a payment pending
appeal.”’.

The
need for the amendment was brought to our attention by Citizens Advice
and the Child Poverty Action Group, which have a number of concerns
about

Column number: 1001

clause 99 and the consequences of the provisions on payments on appeal.
I look forward to hearing the Minister tell us a little more about the
reasons for the clause. The view of specialist organisations is that
the Department for Work and Pensions already has sufficient power to
reconsider and revise decisions if there is sufficient evidence for
doing so.

Clause 99
introduces a new requirement for claimants to request a revision and
have that request determined before accruing the right to appeal to an
independent tribunal. It seems to the organisations, and to us, that
that will introduce an unnecessary and bureaucratic new barrier for
claimants who wish to exercise their appeal rights. Appeal rights are
essential if we are to hold the system to account and expose flaws and
errors in it. The organisations are concerned, as are we, that the new
tier will make the system less user-friendly and will increase delays
in resolving problems, because claimants will inevitably be confused
about the difference between revisions and appeals. They will be in
danger of making inappropriate requests at the wrong time, or failing
to appeal at the right time, because they are confused about their
different rights and responsibilities in the system. That may prejudice
justice and result in applications being wrongly referred back to
claimants as invalid.

Given that
there are no time limits for the benefit authorities when processing
revisions and appeals, there are inevitably long delays with both
processes. A statutory requirement to request and receive a revision
determination will inevitably result in longer delays before problems
are resolved and, in particular, long delays before claimants can
attend an appeal hearing. The worry is that that will leave claimants
in more hardship, with all the risks of homelessness and destitution
that there are if people are left without their basic benefit income.
Given our concerns and the sector’s concerns about why clause 99
exists at all, and why a new request for revision is built into the
system, amendment 251 seeks to redress the risks by ensuring that
vulnerable claimants are not left destitute pending the new, more
complicated appeal process.

6.45
pm

We
are particularly concerned because in universal credit, personal
allowances, payments for children, housing costs and other benefits are
all paid together—that refers back to the amendments that we
have just discussed—which will increase the risk for claimants
and increase demand and pressure on the payment-on-account process.
Under the present system, provision is made for payment of ESA pending
an appeal about the work capability test. At the very least, given the
additional complications, we would like a corresponding provision for
universal credit, so that payment can be made pending an appeal.
Vulnerable claimants would then be in no worse a position under
universal credit than they are now. In a sense, it is a procedural form
of transitional protection. I look forward to the Minister explaining
some of the thinking behind clause 99 and how he will ensure that
delays are avoided and claimants are not left without income in the
intervening period.

Chris
Grayling: The hon. Lady has raised a couple of questions
about the clause generally; I was going to make some remarks on clause
stand part, but if you will allow it, Mr Gray, I would like to do so
now, and do without the stand part debate.

Column number: 1002

I am aware that
there is a degree of misunderstanding about the purpose of clause 99,
and I wish sometimes that some of the groups that are lobbying on the
issue would simply ask the question. The purpose of the clause is
straightforward, and the drive relates particularly to the incapacity
benefit migration process. We are trying very hard to get this right in
the wake of the Harrington review. We are trying to get more decisions
right quickly within Jobcentre Plus to ensure that fewer people end up
going to appeal and that there are fewer successful appeals, because
long waits for successful appeals serve nobody’s purpose. I want
us to get the decisions right quickly.

We will not
always get the decisions right immediately; sometimes people come back
very quickly after the initial decision with new evidence, and we want
to be able to take that into account. One of the frustrations that many
decision makers face, as Professor Harrington highlighted in his
report, is that the judges considering an appeal often have more
evidence available to them than the decision makers in Jobcentre Plus
did. Our focus on strengthening the reconsideration process is all
about making sure that we try to maximise the evidence available to us.
We give people the opportunity to return with further evidence if they
have frustrations, so that we can look again at that evidence and
reconsider the decisions before they go to appeal. In that way, we
can carry out the process more quickly and effectively.
There will always be decisions that are got wrong the first time round,
however hard we try to perfect the system. The focus on reconsideration
aims to ensure that decisions are changed quickly if we get them wrong
the first time.

The challenge
that we face is that if people launch an appeal straight after the
first decision—this happens now, even before we have increased
the focus on reconsiderations—the two things can end up going in
parallel. The judges tell us with some frustration that an appeal will
often reach its due date and no longer be valid, because the person
concerned is having reconsideration or has withdrawn their claim. It
would be crazy if someone said on the same day that they would like a
reconsideration and an appeal, and a couple of weeks later the
reconsideration took place, as a result of which the decision was
overturned, but the appeal carried on. A few months later, after the
administrative work had been done within the tribunal service, somebody
would turn around and say, “Oh, we don’t need that any
more.”

It seemed
entirely sensible to say to claimants that we want to get it right and
that we will have a much more focused reconsideration process. If
someone says that they do not agree with the migration decision on
whether they should be found fit for work or put into the work-related
activity group, it is their absolute right to come back to Jobcentre
Plus and ask for a second opinion, but they should wait until they have
received a second opinion before the start of the appeals process, with
all its complexity of form-filling for the individual, and all the
costs to the tribunal service for a process that might not be
necessary. That is the reason for the clause, which is entirely
sensible. It is not about making people wait for long periods; it is
about making the system better, more efficient and more sympathetic to
people who might have been given a wrong decision the first time
round.

Column number: 1003

The question
arises of whether the approach of someone being left to receive their
full benefits while waiting for an appeal decision is right for appeals
in general. If someone is going through incapacity benefit migration,
for example, and is found to be fit for work but wants to appeal, they
will be moved down to the assessment rate of ESA, which is the same
level as jobseeker’s allowance, until the appeal is heard. If it
is successful and they are put back on ESA, the money lost during that
period will be reimbursed, so they do not lose out financially. Their
claim will be backdated to the date of the original decision, which is
right and
proper.

The
problem with the approach put forward by the hon. Member for
Westminster North is that if someone is on the full ESA amount right
through to the appeal, there will be two effects. First, it creates an
absolute incentive for everybody to appeal. Appeals by people who go
through the process and receive the right decision will be enough of a
challenge, but to create a situation in which people have a tangible
financial reason to appeal, because they will receive more money if
they do, simply makes no
sense.

Secondly,
if the higher rate was paid up to the appeal date, and the original
decision was upheld, someone might have received many hundreds of
pounds in overpayment of benefits that we would have to seek to
recover. People might not have that money anymore, and we would have to
try to recover it from them in the county court, which will end up with
a thoroughly messy situation that is almost impossible to
handle.

That
is why the Labour party in government, when the right hon. Member for
East Ham was in the Department for Work and Pensions, presided over a
system in which people could only lose a benefit as a result of an
appeal. At the end of the application period for ESA, if people are not
allowed to move on to ESA and have to return to JSA, but they want to
appeal against that decision, they will continue to receive the
assessment rate until the appeal is heard. That was the right decision
at that time, and it is the right decision
now.

In
a whole variety of ways, it would be horrendously complex to change the
system in the way described by the amendment. Fundamentally, the clause
is not about creating extra barriers, burdens and obstacles for people
going through the process of having their claims assessed; it is about
streamlining and simplifying that process. I want decisions to be taken
more accurately in Jobcentre Plus. That is why we are working to give
decision makers greater training, why we continue to consider how to
improve the quality of the decision-making process, and why I am
absolutely clear that I want to get as much of this right as possible.
Of course, people will still have the right to appeal, but I do not
want them to start those appeals until we have at least had the chance
to take the right
decision.

Ms
Buck: I think we all agree that a fine balance must be
struck in appeal processes and revisions. However, appeals are an
essential part of testing the effectiveness of a benefits system. It is
important that they happen; it is not a success measure when there are
no appeals. The Minister is completely right that it is a sign that the
system is not working properly when the number or success rate of
appeals is too high, so there is a fine balance.

Column number: 1004

What worries me
about the process of going forward into the universal credit is whether
there is a risk that vulnerable individuals will be left with no income
at all. That is unlike the situation where what is decided on appeal is
whether a person has a higher or lower rate of benefit; in that case,
they still receive a level of income. That refers back—we had
some assurances from the Minister on this point—to the question
of firewalling and whether people could be left with no income at all
during the revision or appeal process. He did not address that point in
his response to me. The example he gave is one that I would not
disagree with, but that is not the only example that we might want to
use in testing whether the measure
works.

We
will have to reflect on what the Minister says. No doubt his words will
be looked at very closely by the advice sector and other agencies.
Those organisations seem to be in dialogue with
officials—rightly so—to try to get a good understanding.
In many cases, they are the organisations that are giving professional
advice to claimants. It worries me that there is such a disjunction
between what the Minister is saying about the purposes of the amendment
and what those organisations are hearing. They genuinely and sincerely
believe that an unnecessary layer of bureaucracy is being injected into
the system, and that a consequence will be that some people are at risk
of losing more of their income under universal credit.

Those people
who are unable to interact with the universal credit through a
professional advice agency will be more confused. The answer to a
problem with the role of appeals is rarely to have an additional tier
of bureaucracy. Such an approach will confuse people, and that is
clearly the sector’s view. We will reflect on the
Minister’s words. I beg to ask leave to withdraw the
amendment.

Amendment,
by leave,
withdrawn.

Clause
99 ordered to stand part of the
Bill.

Schedule
11 agreed
to.

Clause
100 ordered to stand part of the
Bill.

Schedule
12 agreed
to.

Clause
101

Electronic
communications

Question
proposed, That the clause stand part of the
Bill.

Stephen
Timms: I want to ask some questions about the clause,
which deals with electronic communications. I understand that it will
allow the Department to shift existing paper-based processes into an
electronic form and therefore to offer a more efficient and effective
service. The clause came into being because the Department published a
business plan six months ago that said it
would:

“Introduce
automated end-to-end processing of applications, enquiries and changes
of circumstances for all benefits, beginning with Jobseeker’s
Allowance,”

starting
in June 2011 and ending in October 2012. That is what the clause 101
would make
possible.

However,
the Government published a different series of business plans last
Friday, which were picked up in an article in The Times on
Saturday. The Government also published 48 pages showing variations
between the

Column number: 1005

various departmental business plans published six months ago and those
published last Friday. That original proposal of six months ago of
introducing automated end-to-end processing
of

“applications,
enquiries and changes of circumstances for all
benefits”

has
now been changed. The following has now been
proposed:

“To
significantly improve Jobseeker’s Allowance online by fully
automating at least 75% of the processes, with the remainder still
requiring a value-added intervention from
staff”.

That
is due to start not in June but in July this year, and to end next
year. The Committee knows that I do not believe that the information
technology will be ready for all new applicants to universal credit by
October 2013, as the Government have told us it will. Those
who think I am being unduly alarmist about this should take a look at
what has happened here. The document published on Friday gave a bit
more information about why the Government’s ambition has been
scaled back so
dramatically:

“The
new text has been drafted in recognition that full automation of all
benefits”—

bear
in mind that the business plan said six months ago that they would
fully automate all
benefits—

“is
not possible. One of the primary reasons is that a significant element
of the decision/award process, including applying and checking JSA
conditionality, will continue to require human
intervention.”

I
do not know why that was not apparent six months ago, but apparently it
is apparent now.

“A
second reason is that there are a number of complex
‘exception’ cases, for example Share Fishermen, which
would be extremely difficult to automate.”

That is because it all
depends on how much the share fishermen catch on a particular trip, and
programming the IT system to automate the benefits they ought to
receive would be rather
difficult.

“The
aspiration is to maximise automation, rather than to fully automate
benefits
processing.”

The
journalist who wrote that up for The Timesspoke to
somebody in the DWP, who
said:

“A
number of these elements will come under universal credit which will
itself be largely
automated.”

That
is why it was watered
down.

7
pm

Given
the lengthy debate that we had earlier in the Committee about the
problems that I think the Government will have delivering the IT for
universal credit on time, I wanted to put three specific questions to
the Minister. First, will the application process for universal credit
be fully automated? Our understanding was that it would be, but our
understanding was that it would be automated for all benefits, and now
it will be only three quarters automated for one and not at all for the
others. Secondly, will some human intervention still be required for
universal credit applications? In the case of share fishermen, will the
universal credit IT system work everything out automatically? Thirdly,
which, if any, elements that the Government now say cannot be automated
for JSA will be automated for universal
credit?

I
have repeatedly made it clear that I do not believe that the
Government’s plan for IT for universal credit is credible, but I
must say that this development undermines its credibility further. Even
before the parallel IT exercise

Column number: 1006

has begun, it has been delayed—six months ago we were told that
it would start in June this year, and it has already slipped to July,
so it is late before it even begins. The DWP has concluded that an
exercise, which six months ago we were told would be finished by
October next year, cannot be completed at
all.

Harriett
Baldwin: I am enjoying the synthetic anger about IT
problems. The right hon. Gentleman will recall that the introduction of
the working tax credit and the child tax credit was not necessarily a
hallmark of benefit reform under the previous Government. Does he
accept that the Department putting the business plans on its website so
that we can be kept informed of the developments is a welcome addition
to transparency, particularly with regard to
fishermen?

Stephen
Timms: The hon. Lady is right. I was certainly delighted
to find 48 pages of changes to business plans that were published only
six months ago and to discover that it took 48 pages for the Government
to tell us all the things that they got wrong. No doubt we will have
another 48 pages of further changes in another six months. I welcome
that degree of transparency; it is very informative. I did not intend
to express anger, merely some bemusement and perhaps a little sense of,
“I told you so”—these things are
difficult.

Six
months ago, we were told that all benefits would be automated, but it
turns out that it is not possible because of share fishermen and other
considerations. That is an extraordinary blunder on the part of the
Department’s IT function. As he knows, and as I have said
previously, I have a high regard for the IT operations in the
Department. They have a good track record. The fact is, however, that
at the same time as the officials told the Minister that they could
automate all the processes for the benefits system by October next
year, they were also telling him that they could deliver the IT system
for universal credit by October of the following year. Why did they
make such a blunder? Why did they get it so wrong six months ago and
set a date for this change last Friday? Is it because they have
suddenly become incompetent? No, I do not think it is. It is because
Ministers, in their enthusiasm to deliver the ambitious goals that have
been set, are forcing officials to sign up to goals—no doubt
laudable goals—which, in reality, are
unachievable.

Ian
Swales: Does the right hon. Gentleman agree that the
activities of share fishermen are only one example of self-employment?
Does he share the hope that the Minister will give us some reassurance
that self-employment will be comprehensively
covered?

Stephen
Timms: The hon. Gentleman is right. We have no information
at all on how self-employed people will be dealt with in the universal
credit system, whether by IT or by human intervention. I suspect that
share fishermen will continue to require human intervention. The way it
looks at the moment, large numbers of self-employed people may well
have that requirement as well. The hon. Gentleman is right to remind
the Committee of the importance of the Government giving us an answer
on what will be done about self-employed people.

My theory is
that the Minister said, “Let’s go for automating the
benefits system. This is what we have to do.” Officials loyally
said, “Okay, we will do it all by

Column number: 1007

October 2012.” Now, however, they have realised that
it is, to quote page 37 of this document, “Not
possible.” That is what has also happened with the IT for
universal credit. I appeal to the Minister to take a long, hard look at
the plan for the IT for universal credit and the claim that it can all
be delivered and will all work perfectly, for share fishermen and all,
by October 2013. The truth is that that is no more deliverable than the
plan unveiled six months ago—now abandoned—for benefit
automation.

Chris
Grayling: I do love a nice conspiracy theory to finish the
day. The right hon. Gentleman has asked sensible questions about
aspects of the delivery of the universal credit IT system, which we
have sought to answer. We will continue to offer him answers to his
questions over the months ahead. This one, however, is stretching a
point
slightly.

Let
us be clear. We did not say, “Wave a magic wand, we have taken
steps since the election to suddenly start automating the benefit
processing operations of the DWP.” In many of these cases, we
inherited programmes from the previous Government, who were sensibly
moving to a greater level of automation and a greater level of usage of
IT. It is possible that the right hon. Gentleman could also have
explained the changes that he pointed out in the business plan by
saying that, as we got more into the workings of the Department, we
discovered some shortcomings in what he and his colleagues were doing
before they left
office.

None
the less, on the business plan changes the right hon. Gentleman has
taken a three-second cinema ad and turned it into a blockbuster. The
DWP business plan confirmed a small reduction in the number of JSA
claims that will be automatically processed from start to finish, due
to the fact that not all claimants can make their claims online and
that some people will still need to speak directly to one of our
advisers. There is no great rocket science in that. We have said
clearly that when universal credit starts, a small part of its delivery
will not be able to take place through automated systems. The intention
is that the vast majority of what we do in the future will be done, so
far as is possible, through automated
means.

Stephen
Timms: The Minister is right. The announcement is that at
least 75% of processing will be automated. I

Column number: 1008

am not sure that 75% is a small reduction, even from 100%, but it is a
reduction, certainly. The announcement is also that the rest of the
benefit system will not be automated at all. The automation effort,
which was going to be applied to all benefits six months ago, will now
be applied only to JSA, and in that case only to 75% of
it.

Chris
Grayling: The right hon. Gentleman is right. One tends not
to do a nice respray of a car that is about to be scrapped. Income
support, for example, will be scrapped progressively from two
years’ time, so it would not be entirely logical for us to spend
lots of money on automating income support only to scrap it. I suspect
that the Public Accounts Committee would have something to say about it
if we
did.

Naturally,
with the transformation of the benefit system that the Government have
initiated, including the move to universal credit and the total
transformation of the way that our welfare state works, it is not
entirely logical to spend lots of money to automate some of the legacy
schemes, too. We have changed the plans that we inherited from the
previous Government, because we are not keeping many of the things that
they intended to keep in
place.

That
is simple and basic. The right hon. Gentleman is trying to see issues
where there are none. The system and the business plan we are talking
about are separate from the one that will run universal credit, which
is still on track for delivery in 2013, as we have
committed.

The
clause will introduce a simple technical change that streamlines the
DWP’s automation process. It will create a simpler approach to
regulation and will not make any dramatic changes. It will not
introduce new powers. It will simply make it easier in regulatory terms
to make the changes that are in train under the Government and were in
train under the previous
Government.

Question
put and agreed
to.

Clause
101 accordingly ordered to stand part of the
Bill.

Ordered,
That further consideration be now adjourned.—(Miss Chloe
Smith.)